1 Graph Will Make You Rethink Bank of America Corp and Citigroup, Inc

We're more than a quarter of a way through 2014, but one critical metric at Bank of America and Citigroup has moved in opposite directions over the last year.

Apr 4, 2014 at 8:29AM

In the last year, Citigroup (NYSE:C) and Bank of America (NYSE:BAC), moved in different directions -- which could create opportunity for investors.

Strong 2013
Bank of America and Citigroup each had a strong year in 2013. Citigroup's bottom-line surged. The same is true of Bank of America, as its net income nearly tripled thanks to 2013 marking a year as it turned a corner from the woes that once characterized it.

Citi By S

Source: Flickr/S_E_Santana.

Different paths in 2014
Yet the same has not been true of 2014, as things have gotten much worse for Citigroup.

First, it announced it had to revise its income as a result of fraudulent activity from its operations in Mexico. Then, the bank was met with news the Federal Reserve would be denying its request to raise its dividend from $0.01 to $0.05 and buyback $6.4 billion worth of its common stock.

Meanwhile, Bank of America received word it could boost its dividend -- the same amount no less -- and make buybacks of $4 billion.  

Just this week, it was reported the FBI will begin a criminal investigation for the fraud in its Mexican unit, which is already under investigation from a civil standpoint by the Securities and Exchange Commission. While the fraud alone cost Citigroup $400 million, it's possible this could get even worse. 

The unsaid story
However, what is often unsaid about the two banks is Citigroup, even with its troubles, outpaced Bank of America across the best-known banking profitability metrics last year, as shown in the table to the right.


Source: Company investor relations.

In fact, Citigroup was able to grow its tangible book value -- one of the most essential measures of a bank's underlying value -- by 8.1% whereas Bank of America saw its rise by just 3.2%.

All of this combined has resulted in one stunning graph:

Source: Capital IQ.

As you can see, in April of last year Bank of America traded at a slight premium to Citigroup. Yet Citigroup's multiple has been essentially flat over the last year, whereas Bank of America has watched its grow by nearly 40%.

Unfairly punished
Citigroup has had a difficult few months, but on a comparable basis, a piece of Bank of America's equity is now valued 50% higher than one at Citigroup.

This isn't a knock on Bank of America (I'm a happy shareholder), but market isn't giving Citigroup enough credit. Relative value alone is not reason to make an investment, but the reality is Citigroup has continuously been valued at less than what would be remaining if it was liquidated and only its accumulated equity remained.

Despite headline noise, Citigroup's attractive valuation certainly presents a compelling reason to buy today.

Big banking's little $20.8 trillion secret
While the secret surrounding the relative valuation of Bank of America and Citigroup is now out of the bag, there's an even bigger in the banking industry that is still under wraps. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

Patrick Morris owns shares of Bank of America. The Motley Fool recommends and owns shares of Bank of America. It also owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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