Bank stocks: Why Citi could win big
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Bank stocks: Why Citi could win big

Talk to investors in financial stocks for background on profiles of Citi and Goldman Sachs and they assume Euromoney is working up a simple comparison between the biggest loser and the biggest winner in investment banking from the near collapse of the financial system.

But which is which?

Goldman Sachs is taken aback by the loathing it has stoked up by so quickly running up bumper profits raising equity for companies and banks to de-lever. Goldman is the best-managed firm on the Street. But its returns might never regain their former peaks, while its fiercest rival, JPMorgan, pushes its own higher than they were before the crisis. It will be interesting to see how Goldman’s fabled risk management copes when interest rates inevitably rise. There are not so many partners still there who can recall how rising rates nearly bankrupted the firm in 1994.

Back then, Citicorp had not long emerged from the shadow of loan losses that led lawyers for the Federal Reserve to draft up the documents for its own bankruptcy at the start of the decade. What a recovery it then embarked on. Its shares went from under $9 in 1992 to close to $140 in the weeks before the merger with Travelers in 1998 and $178 on the eve of that deal. Is it conceivable that it could do something similar again?

Many of the senior bankers now flocking to its colours, as Vikram Pandit and John Havens recruit the talent to revive its markets businesses, must hope so. Citi stock is a big part of the attraction in coming to a Tarp bank.