Jan 122012

Citigroup ( C ) and Bank of America ( BAC ) have been steadily rising all day, even as the rest of the market has traded in a sluggish pattern all day. The two big banks are even outperforming other financials, which are up slightly but aren’t doing nearly as well as Bank of America and Citigroup.

Bank of America is up a whopping 24% this year, the best in the Dow, after trailing all other Dow stocks in 2011. Citi has risen 19%. Both are up more than 4% this afternoon. Analysts have generally been more bullish on banks in the past couple of weeks, and news out of Europe has been incrementally positive, despite continued weakness in the Euro.

Bank of America may be doing just enough to keep investors happy. The company’s future is filled with unknowns, including risks in Europe and vast litigation exposure. But the company has begun to address the problems it can control – cutting expenses and selling assets, albeit often at a loss. A Bernstein report out today indicates that the company’s mortgage putback exposure – the money BAC must spend to buy back mortgages from toxic securitized pools – may not be as large as some had feared, Dow Jones Newswires reported. The company could set aside $4.3 billion to buy back mortgages in the fourth quarter, leaving $1.2 billion more to repurchase, Bernstein estimates.

As for Citi, numerous analysts have been making a case for the stock, claiming its international exposure and expectations for a growing dividend make the stock compelling.

“We see significant long-term value in Citigroup shares considering our expectations for credit leverage, book value growth and capital return potential over the next two years,” wrote Bernstein analysts today in choosing Citi as the top pick in financials for this year.


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