2 bank stocks I just bought

Bank stocks still haven’t recovered from March’s decline. That is known, given the uncertainty in the sector, but I think there are some good opportunities.

I have taken the opportunity to buy shares in two banks this week – Bank of America (NYSE: BAC) and Citigroup (NYSE:C). That’s why I chose this from the UK bank stocks.

Sell ​​first, ask questions later

Bank stocks have been down lately. But I don’t believe that this denial can be applied in the case of Bank of America or Citigroup, so I bought both.

The past month or so has seen some significant stress in the banking sector. I don’t see any sign of liquidity concerns troubling the smaller regional banks at BofA or Citi.

In fact, the banks I buy from are probably stronger than they were a month ago. The machine of every business is the deposit base, which is increasing because the risk-free customers move cash.

Despite this, Bank of America shares have fallen about 19% over the past month. And Citigroup shares fell about 11%.

I’m not saying that either is entirely without risk. That is clearly not true – each has its own issues to contend with today’s concerns for investors.

Tighter regulations — for liquidity, or provisions for bad loans — could cut Bank of America’s profits. And Citigroup is in the midst of a restructuring, which could prove costly.

In the last month though, the sell-first-ask-questions-later approach of investors has seen both stocks fall to levels I think are unfair. That’s why I’ve bought it for my portfolio.

Why not a UK bank?

Fair enough, but there is something in common with British banks. So why have I bought US banks, instead Lloyds Banking Group and Barclays?

In my view, US banks offer better shareholder returns. While Lloyds and Barclays offer attractive dividends, Bank of America and Citigroup also return capital to investors through share buybacks.

When a company buys back stock, the number of shares outstanding decreases. As a result, each remaining share accounts for the overall business, becoming more valuable.

BoA has bought back 30% of its shares over the last decade, meaning that each remaining share is worth 40% more. And Citi has repurchased 36% of the shares, resulting in a 56% increase in the value of each share.

With Lloyds and Barclays, there is no comparison. Lloyds has reduced its share count by under 2% and Barclays’ share count is higher than it was a decade ago.

That is why I have focused on US banks. As a British investor, this brings with it the added risk of currency fluctuations, but I think the extra return is more than worth it.