How Have Citigroup’s and Wells Fargo’s Stocks Performed?
In 2016 so far, shares of Wells Fargo (WFC) have underperformed the financial sector, as well as broad markets.
In a Bloomberg survey of 37 analysts, 19 analysts have assigned a “buy” rating to Wells Fargo, while 13 have rated it a “hold.”
Wells Fargo (WFC) and Citigroup (C) have regularly rewarded their shareholders through dividends and share buybacks.
Generally, banking stocks (XLF) trade between 1x and 2x their book values. Stocks trading lower than their book value attract investor attention because they are considered to be generating extremely poor returns.
The consumer banking segments of Wells Fargo and Citigroup are similar to any standard commercial bank and offer a diversified range of products and services for consumers and small businesses.
Citigroup’s interest rate sensitivity is the lowest among its peers. A parallel 100 basis-point increase in interest rates would add $1,984 million to Citi’s revenues.
Wells Fargo relies less on investment banking and trading revenues than its peers J.P. Morgan (JPM), Citigroup (C), and Bank of America (BAC).
In 2Q16, Citigroup’s (C) revenues fell 10% to $17.5 billion, while revenues of Wells Fargo (WFC) grew 4% year-over-year to $22.2 billion.
Major banks with high interest-related income have been struggling with compressed margins and are eagerly waiting for a rate hike.
Wells Fargo and Citigroup have recovered well from the financial crisis. They have generated steady profits in the last few years and have strengthened their capital.
In 2016, so far, shares of Bank of America (BAC) have underperformed both the financial sector and the broader market.
Bank of America (BAC) hiked its dividend by 50% to $0.075 after it cleared the Federal Reserve’s 2016 stress tests in June 2016.
Bank of America’s shares are currently trading extremely cheaply compared to those of its peers.
Since the 2008 financial crisis, Bank of America (BAC) has been focusing extensively on expense control mechanisms.
The president of Bank of America’s (BAC) Wealth Management arm US Trust highlighted the importance of expanding the wealth management business.
Major banks such as Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), and Citigroup (C) have large oil and gas loan portfolios.
Bank of America’s (BAC) earnings are extremely sensitive to interest rate changes. Low interest rates weighed on the bank’s top line in 2Q16.
Bank of America (BAC), like most other banks, stands to benefit from an interest rate hike.
Wall Street analysts have been bullish on shares of Bank of America due to its attractive valuations and the prospect of an interest rate hike in September.
In a report last week, Goldman Sachs (GS) reiterated its “conviction buy” rating on Bank of America (BAC) and shared a positive outlook on the stock.