The Recent Performance of Bank of America - Essay Example

The emergency aid, to the tune of $25 billion, provided by the US government to save the bank was later converted into common stock. The government also guaranteed losses to the tune of $300 billion due to the troubled assets of Citibank. Subsequently, the restructuring exercise done by the management under the leadership of the newly joined CEO Vikram Pandit did turn the table. The bank showed a profit in the last four figures is a testimony to the successful strategic actions taken by the management.

Pandit in an address to the company employees listed the following objectives to spearhead the bank to old glories.1. The focus is now on emerging markets. Citibank is well placed to tap the opportunities due to the wide network of its offices throughout the world. Bank aims at remaining number one in emerging markets.2. The objective is to become the premier digital bank in the world through technological up-gradation. The bank is planning to roll out smart banking technology in all major markets.3. Bank will focus to provide the most up-to-date information to all their clients with all details of why and how. 4. Bank would take great strides in the coming years by meeting the financial needs of their clients from infrastructure to alternative energy to many development projects in the fastest growing economies in the world.

Bank of America While comparing Citibank with Bank of America, it will be worthwhile to look at the following key parameters for the 12 months period of the last completed financial year.Key ParametersCitibankBank of AmericaMarket capitalization97.6B82.79BQuarterly Rev growth-1.3%-45.4%Operating Margin19.8%0.27%EPS3.06-1.64P/E0.94N.APEG (5 years expected)0.60-3.43.

8 billion in the second quarter this year. The biggest issue with BOA is the $408 billion of mortgages that the bank is holding in home equity. Banks future is linked with the recovery of the housing market and that is not likely to show any sign of recovery because of the high unemployment rate prevailing in the US market. The depressed economy in the US and the high unemployment rate will keep the housing market in a subdued state for quite a long time. For this reason, BOA remains a highly risky stock with not much of a hope of any dramatic improvement in coming years.

Moreover, BOA is not active enough in the emerging markets and developing economies with a possibility of getting benefited like Citibank. The Bank for Investment From the above analysis it seems that though both the banks had the worst period during the subprime crisis, Citibank is displaying the required dynamism to come out of the crisis through better restructuring strategies and clear objectives in the mind. The market will continue to pass through volatile phases for some more time to come but due to larger global reach, Citibank will be in a better position to offset negativities prevailing at developed markets through a larger share in emerging and developing economies.

Considering horizon of 5 years and for the reasons mentioned above, I would certainly bet on Citibank and would prefer to invest in it for a longer period regardless of immediate hiccups that capital markets may display.