Bank of America Corp (NYSE: BAC)’s stock is trading near its 52 week lows and hedge fund managers aren’t happy, causing five hedge fund managers to sell shares of the Charlotte-based bank’s stock and move their funds into Citigroup, Inc (NYSE: C).
Reuters first reported yesterday that Lee Ainslie of Maverick Capital sold his entire stake in Bank of America Corp (NYSE: BAC) during the second quarter and moved the money into Citigroup, Inc (NYSE: C), and he’s not alone. Reuters reported that Ainslie was joined by a number of other top hedge funds which moved their money out of Bank of America and into Citigroup.
During the second quarter, Larry Robbins’ Glenview Capital sold some of its Bank of America stock and added to its stake in Citigroup. According to Reuters, “Andreas Halvorsen’s Viking Global Investors, Chris Shumway’s Shumway Capital and Steve Mandel’s Lone Pine capital all exited BofA. Bill Ackman’s Pershing Square Capital and Thomas Claugus’s GMT Capital took up new stakes in Citi.” David Tepper’s Appaloosa Management reduced positions in both Bank of America and Citigroup. John Pauls kept his positions static during the quarter.
Although Bank of America’s stock has recovered better than Citi’s since the 2008 market drop, the Charlotte-based bank’s shares are trading just 4.5% above their 52 week lows. BofA is much more dependent on U.S. consumers and has a lot more to lose than Citigroup because of a tightening domestic economy and stricter banking regulations. Bank of America has a much larger branch base in the United States and has a higher percentage of its loans and assets from U.S. customers, making it much more vulnerable to domestic economic woes.
The economics of Bank of America Corp (NYSE: BAC)’s consumer business could be dramatically changed when new banking rules, such as the provision which limits fees that banks can collect from processing debit cards, go into effect. Although both companies will be affected, Bank of America’s debit business is ten times larger than Citigroup’s. Bank of America warned that it could lose as much as $1.8 billion to $2.3 billion of its $2.9 billion in revenue annually from the law.
Shares of Bank of America Corp (NYSE: BAC) stock traded up 3.29% during early morning trading on Wednesday, hitting $12.86 as part of a broader market rally. Shares of Citigroup, Inc (NYSE: C) traded up 2.32% on Wednesday, hitting $3.81 by 10:00 AM ET.
