Citigroup vs. Bank of America: Which Stock Has More Upside Potential?
When it comes to banking giants, Bank of America BAC and Citigroup C are often talked about. Both operate across consumer, corporate and investment banking sectors, and are currently navigating similar macroeconomic challenges.
The performances of BAC and C are highly influenced by the Federal Reserve's monetary policy. As the central bank lowered rates last year, both banks benefited from that as funding costs came down. Now, with the central bank adopting a cautious approach toward rate cuts because of the Trump administration's tariff plans, Bank of America and Citigroup are likely to gain as rates are expected to remain higher for longer.
Let us closely examine other factors at play for BAC and C to determine which stock currently presents the better investment opportunity.
Bank of America's aggressive branch expansion across the United States as part of a broader strategy to solidify customer relationships and tap into new markets will drive net interest income (NII) growth over time. The company continues to align its banking centers according to customer needs.
The bank has embarked on an ambitious expansion plan to open financial centers in new and existing markets. By 2027, it plans to expand its financial center network and open more than 150 centers. Given such expansion efforts, BAC's expenses are likely to remain elevated in the near term. The company expects non-interest expenses to rise 2-3% in 2025.
Further, BAC has been renovating and updating its existing financial centers across the country for clients to engage with financial specialists. These initiatives, along with the success of the person-to-person money transfer system Zelle and the digital financial assistant Erica, will enable the company to improve digital offerings and cross-sell several products, including mortgages, auto loans and credit cards.
Bank of America is seeing an upside in NII in 2025, driven by decent loan demand, higher-for-longer interest rates and robust deposit balance. The company expects 2025 NII to rise 6-7%.
Citigroup has been emphasizing leaner, streamlined operations to reduce expenses. The transformation process included an organizational restructuring, as well as the elimination of 20,000 jobs by 2025. Further, the company has been focusing on growth in its core businesses by streamlining its overseas operations. In April 2021, it announced the plan to exit the consumer banking business in 14 markets across Asia and EMEA.
In sync with this, this week, Citigroup, through its subsidiary Citibank Europe Plc, announced that Citi Handlowy agreed to sell its consumer banking business in Poland. The company has successfully exited from consumer banking businesses in nine countries, including Australia, Bahrain, India, Indonesia, Malaysia, the Philippines, Taiwan, Thailand and Vietnam. As part of its strategy, Citigroup continued to make progress with the wind-downs of its Korea consumer banking operations and its overall operations in Russia, as well as the preparation for a planned initial public offering of its consumer banking and small business, and middle-market banking operations in Mexico.
These moves by Citigroup are likely to free up capital to invest in higher-return segments like wealth management and investment banking. Also, a reduction in functional roles, along with the bank's consumer banking divesture effort, will help it reduce expenses. For 2025, management expects expenses to be below $53.4 billion. In 2024, the company's expenses were $53.9 billion.
Citigroup is expected to witness an improvement in NII in 2025, given decent loan demand and higher deposit balances. The company projects NII (ex-Markets) to rise 2-3% year over year in 2025.
In the past year, C and BAC shares have risen 25.5% and 16.9%, respectively, compared with the industry's growth of 31.1%. Though both underperformed the industry average, C performed better than BAC.
Price Performance
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In terms of valuation, Citigroup is currently trading at a 12-month forward price-to-earnings (P/E) of 9.28X, higher than its five-year median of 8.45X. The BAC stock, in contrast, is currently trading at a 12-month forward P/E of 11.27X, which is lower than its five-year median of 11.59X.
Price-to-Earnings F12M
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Both are trading at a discount compared with the industry average of 13.64X. However, BAC is more expensive than the C stock.
Additionally, Bank of America and Citigroup are required to undergo annual stress tests conducted by the Fed before they can announce their capital distribution plans. Following the stress test, they hiked their dividends last year. Citigroup hiked its quarterly dividend by 6% to 56 cents per share. It has a dividend yield of 2.99%. Similarly, BAC increased its quarterly dividend by 8% to 26 cents per share. It has a dividend yield of 2.36%. Based on dividend yield, C has an edge over BAC.
Dividend Yield
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Both companies have a share repurchase plan. In July 2024, Bank of America authorized a $25-billion stock repurchase program, effective Aug. 1, 2024. As of March 31, 2025, almost $14.4 billion worth of buyback authorization remained available. Similarly, on Jan. 13, 2025, Citigroup's board of directors approved a $20-billion common stock repurchase program with no expiration date. As of March 31, 2025, it had nearly $18 billion of stocks available under the plan.
The Zacks Consensus Estimate for BAC's 2025 and 2026 sales implies year-over-year increases of 5.9% and 5.6%, respectively. Likewise, the consensus estimate for 2025 and 2026 earnings indicates 12.2% and 15.3% growth, respectively. Bank of America's earnings estimates for 2025 have been revised upward, while for 2026, estimates have moved lower over the past 30 days.
BAC Estimate Revision Trend
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The Zacks Consensus Estimate for C's 2025 and 2026 sales reflects year-over-year growth of 3.2% and 3%, respectively. Likewise, the consensus estimate for 2025 and 2026 earnings indicates a rise of 23% and 25.9%, respectively. Its earnings estimates for 2025 and 2026 have been revised upward over the past month.
C Estimate Revision Trend
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BAC is focusing on aggressive branch network expansion across the United States, and significant technology investments to enhance customer experience and cross-selling opportunities. While this long-term strategy aims to deepen customer relationships and drive NII growth, it involves substantial upfront costs.
In contrast, Citigroup is executing a highly disciplined and focused restructuring strategy. The exit from underperforming consumer markets is freeing up resources to redeploy into higher-margin businesses. This streamlining not only enhances operational efficiency but also helps the company to reduce costs.
BAC anticipates higher NII growth in 2025, driven by a stable interest rate environment and sustained loan growth. However, its expenses are also expected to increase. Moreover, BAC's earnings estimates have seen some downward revisions for 2026.
Alternatively, C projects decent NII growth this year but expects expenses to be below the 2024 level, leading to a projected earnings growth significantly outpacing BAC. Also, upward earnings estimate revisions indicate growing analyst confidence.
Hence, Citigroup's sharper focus on cost reductions, bullish analyst sentiments compared with BAC, cheaper valuation and better stock performance position it as the more compelling investment opportunity.
C and BAC currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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