When the financial crisis struck 12 years ago, banking stocks took a hit that’s hard to forget. From the US to the UK, some of the biggest banks’ stock prices have never gone back to the pre-crisis days. I’m talking about stocks like Citigroup (NYSE: C) or closer home, the FTSE 100 Lloyds Bank (LSE: LLOY). Both banking entities can come out of the current crisis in completely different places, however, because each is grappling with a unique situation. As an investor, I’m now interested in finding out which one of the two – Citigroup or Lloyds Bank stock – has a better chance of bouncing back?
Citigroup’s results beat analyst estimates
Citigroup released results yesterday, which beat analyst estimates. In lockdown times, that’s a bigger positive than at other times. Its revenues are up by 5% from last year. Though earnings have dropped on higher loan provisions, it’s still profit-making, supported by the institutional clients group which includes investment banking and fixed income markets.
The Citigroup stock price slipped marginally though, probably as investors remain uncertain about the long term. Banking stocks are linked closely with economic activity. The macroeconomic outlook is dismal at worst and uncertain at best right now. This fact alone could keep the stock price from rising fast, I reckon. But, it can still make some gains as is evident from the 44% recovery since the stock market crash.
Lloyds Bank stock continues sideways movement
The Lloyds Bank stock, on the other hand, hasn’t recovered quite as much. Its share price is up only by 8.5% from its lowest. Interestingly, Lloyds Bank hit its lowest only after the FTSE 100 index did and was a result of suspending dividends. Lloyds Bank has clearly not been a growth stock for a long time and it’s quite likely that many investors were drawn to its high dividend yield. With no passive income, it’s little surprise that it just wasn’t very attractive anymore.
With the UK economy in a precarious place, I reckon that the Lloyds Bank share price performance will remain underwhelming. And with Brexit around the corner, there’s added uncertainty for it. I’ve been bearish on the Lloyds Bank stock for a while now, and the comparison with the Citigroup stock only makes some of its current challenges more glaring.
Citigroup stock v Lloyds Bank stock
This doesn’t mean that the Citigroup stock is in a perfect place. Its consumer banking segment is struggling, for instance. But I like its globalised presence across Europe, Asia, and Latin America, besides the US. Lloyds, on the other hand, is UK-focused. Further, Citi’s still a dividend-paying stock. The dividend yield isn’t exactly eye-watering, at 3.9%, but it still gives it an edge over Lloyds, which isn’t paying dividends at all. A sharper bounce back in stock price also goes in its favour.
If I’m looking to invest in financials, I’d prefer Citigroup over Lloyds Bank stock today.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.