BankAm topples Citi as world's largest bank

NEW YORK: Bank of America on Tuesday became the world’s largest bank by market value, dethroning longtime leader Citigroup. The change reflects investor confidence in Charlotte, North Carolina-based Bank of America’s aggressive expansion into a national bank, and New York-based Citigroup’s comparative struggles, especially in US consumer banking.

“It reflects investors’ preference for a growth story,” said Jim Russell, director of core equity strategy at Fifth Third Asset Management in Cincinnati, which owns both banks’ shares. “Bank of America seems to be hitting on all cylinders domestically.

In contrast, Citigroup has run into growth bumps that are taking longer to fix than many investors would like.” Based on reported shares outstanding, Bank of America’s market capitalisation in early morning trading reached $239.36bn, topping Citigroup’s $239.34bn. The banks’ rankings later seesawed. Among publicly traded US companies, the banks rank fourth and fifth in market value, behind Exxon Mobil, General Electric and Microsoft.

Kenneth Lewis, Bank of America’s chief executive, has emphasised growth in the US, especially through acquisitions such as FleetBoston Financial and credit card issuer MBNA, which together cost about $82bn. Citigroup chief executive Charles Prince, meanwhile, has focused on ‘organic’ growth, especially internationally, but has struggled to keep costs down. In the second quarter, Bank of America out-earned Citigroup for the first time, $5.48bn to $5.27bn.

Bank of America and Citigroup were not immediately available for comment. Being bypassed is not a definitive gauge of Citigroup’s long-term prospects, but might be a blow for a bank that prides itself on its size and reach, in more than 100 countries. Citigroup remains the biggest US bank by assets, a traditional measure of size, with $1.63 trillion compared with Bank of America’s $1.45 trillion.

Britain’s HSBC Holdings last week said it had become the world’s biggest bank by assets, with $1.74 trillion. Japan’s Mitsubishi UFJ Financial Group also led Citigroup earlier this year, but has fallen back. Adding MBNA turned Bank of America into the biggest US credit card issuer. The bank also operates some 5,800 US branches, six times as many as Citigroup, and controls 10% of US deposits.

Though it invests in such countries as Brazil and China, foreign operations generate less than 10% of Bank of America’s earnings. Prince hopes to generate half of Citigroup’s business outside the United States, up from about 40% now. Yet his focus on organic growth bucks the reputation of his predecessor and mentor, Sanford ‘Sandy’ Weill.

Citigroup’s earnings have fallen short of analyst estimates four times in five quarters. Last month, Saudi Prince Alwaleed bin Talal, the bank’s largest individual investor, said Citigroup must undertake ‘draconian’ measures to cut costs.