This week's Wall Street Journal featured an article, on Friday, announcing that Bank of America (really the renamed NCNB of old) is about to become a larger bank, by market value, than Citigroup.If this doesn't highlight the wrong measure, I don't know what does? Ranking the banks by deposits?
As it happens, BofA has been superior by a truly important measure for some time now. As the table above shows (click on it for a larger view), over the last five years, it's total return to shareholders has averaged 14.4%, while Sandy Weill/Chuck Prince's Citigroup has lost shareholders 3.9%, on average. During the same period, the S&P500 has gained 3.2% per year, on average. Further, BofA outperformed Citi for 3 of the 5 12-month periods, and nearly tied it in a fourth (2004).
Tying in with the Friday article, and another one earlier in the week, about Prince's vow to grow "operating leverage" are the upper rows of the table above. It clearly shows that Citi's revenue growth has been anemic for the past five years. Once again, except for 2002, BofA outgrew Citi in terms of revenues. Both have been accelerating since the bottom of the recent recession in 2002. Citi may be improving, but, again, BofA has done even better.
Granted, BofA is not yet sufficiently superior to make it into my portfolio selections. But at this rate, it'll be there years before Citi.
Size has nothing to do with the comparison of these two financial giants. Ken Lewis has been doing something a lot better than Chuck Prince and, or course, his predecessor, Sandy Weill. And the consistently better total returns prove it.
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