Is Citigroup Inc. (C) Still On The Way Up?

Two other large banks trading at a discount to book value are Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM). Bank of America is actually cheaper in these terms, with a P/B ratio of 0.5, but it is doing poorly at getting returns on those assets (revenue and earnings were down sharply there as well in the third quarter) and so its forward P/E is 11. We think that we would avoid it. JPMorgan Chase is a more across-the-board value stock, with a P/B of 0.9 and a forward P/E multiple of 8, and can actually point to a 34% increase in net income in its most recent quarter compared to the same period in the previous year.

We can also compare Citi to Wells Fargo & Company (NYSE:WFC) and HSBC Holdings plc (NYSE:HBC). These banks share a P/B ratio of 1.2, representing a premium on the book value of their equity. In Wells Fargo’s case, this makes some sense; it is well known as a safer and more conservative bank, its business has been doing well recently, and in terms of forward earnings estimates it actually looks like a good value at 9 times consensus earnings for 2013. It’s more expensive than Citi, and even JPM, but it might merit that pricing. HSBC, meanwhile, is in the category of banks which reported double-digit percentage declines in revenue and earnings last quarter versus a year earlier. It’s apparently a very efficient bank, as its market cap and forward earnings estimates imply a forward P/E of 8, but we don’t think that we would buy it.

Citigroup certainly doesn’t look like that bad a value at this time. However, we think that investors looking to go long large banks should also consider JPMorgan Chase and Wells Fargo. The latter of these is almost certainly a safer investment, regardless of price to book ratios, and in terms of earnings it’s not particularly expensive. JPMorgan Chase seems to occupy a middle ground- posting a good value case, but also with a growing rather than shrinking business.