What An $8.5B Settlement Would Mean for Bank of America Corp (BAC)

Why Citigroup is Less Likely to Lose Out

Citigroup Inc (NYSE:C) may also lose out as investors switch back to Bank of America. However, it doesn’t look primed to dive as far as JPMorgan. The company is also well off its pre-recession price of about $550. Citigroup has also recently settled a lawsuit related to selling hundreds of millions of dollars worth of mortgage-backed securities. The May settlement wasn’t disclosed to the public, but the company was being sued by Allstate over more than $200 million of securities purchased from Citigroup Inc (NYSE:C). That lawsuit is peanuts compared to the potential Bank of America deal that could cause investors in banks to lean towards Bank of America Corp (NYSE:BAC).

In looking at the complete picture, Citigroup still hasn’t cleaned up much of the mess left by the financial crises. While BofA is making massive payments to address issues, Citigroup’s balance sheet is still riddled with flaws. The firm has nearly $150 billion in bad loans, which will drag down profits. Furthermore, the ongoing lawsuits aren’t being settled fast enough, and the company still faces a major hindrance due to a lawsuit from the Federal Housing Finance Agency.

What now?

As a long-term investor, I am ready to ride out the sharp price fluctuations that are likely to hit Bank of America Corp (NYSE:BAC) in the next year, as it faces much of the rises and falls of positive and negative economic news. This company is rapidly healing from the recession and is just about in shape to hit a home run, and that trend has already started. JPMorgan and, to a lesser extent, Citigroup, are about to get crushed. Sell those two companies and buy BofA, and then keep up to date with earnings and settlement agreements, as these will likely indicate a chance to put more money into this company.

The article What An $8.5-billion Settlement Would Mean for Bank of America originally appeared on Fool.com and is written by Phillip Woolgar.

Phillip Woolgar has a position in Bank of America. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, Citigroup Inc (NYSE:C) , and JPMorgan Chase & Co (NYSE:JPM). Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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