Critical Analysis: Bank of America (NYSE:BAC) vs. CIT Group (NYSE:CIT)

Bank of America (NYSE:BAC) and CIT Group (NYSE:CIT) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, risk, profitability, institutional ownership, valuation, earnings and analyst recommendations.

Profitability

This table compares Bank of America and CIT Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bank of America 19.50% 8.00% 0.74%
CIT Group -16.59% -1.46% -0.14%

Valuation and Earnings

This table compares Bank of America and CIT Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Bank of America $113.59 billion 2.93 $27.43 billion $2.94 13.12
CIT Group $3.29 billion 1.57 $529.90 million $5.06 10.36

Bank of America has higher revenue and earnings than CIT Group. CIT Group is trading at a lower price-to-earnings ratio than Bank of America, indicating that it is currently the more affordable of the two stocks.

Dividends

Bank of America pays an annual dividend of $0.72 per share and has a dividend yield of 1.9%. CIT Group pays an annual dividend of $1.40 per share and has a dividend yield of 2.7%. Bank of America pays out 24.5% of its earnings in the form of a dividend. CIT Group pays out 27.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Bank of America has increased its dividend for 1 consecutive years and CIT Group has increased its dividend for 1 consecutive years.

Insider & Institutional Ownership

68.1% of Bank of America shares are owned by institutional investors. Comparatively, 90.5% of CIT Group shares are owned by institutional investors. 0.2% of Bank of America shares are owned by insiders. Comparatively, 0.7% of CIT Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings for Bank of America and CIT Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bank of America 2 6 14 0 2.55
CIT Group 0 8 1 0 2.11

Bank of America currently has a consensus target price of $34.92, indicating a potential downside of 9.48%. CIT Group has a consensus target price of $39.06, indicating a potential downside of 25.51%. Given Bank of America’s stronger consensus rating and higher possible upside, analysts clearly believe Bank of America is more favorable than CIT Group.

Volatility and Risk

Bank of America has a beta of 1.59, meaning that its share price is 59% more volatile than the S&P 500. Comparatively, CIT Group has a beta of 1.61, meaning that its share price is 61% more volatile than the S&P 500.

Summary

Bank of America beats CIT Group on 11 of the 16 factors compared between the two stocks.

Bank of America Company Profile

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. Its Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, noninterest-and interest-bearing checking accounts, and investment accounts and products; and credit and debit cards, residential mortgages, and home equity loans, as well as direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The company's Global Wealth & Investment Management segment offers investment management, brokerage, banking, and trust and retirement products and services; and wealth management solutions, as well as customized solutions, including specialty asset management services. Its Global Banking segment provides lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, and short-term investing options and merchant services; working capital management solutions; and debt and equity underwriting and distribution, and merger-related and other advisory services. The company's Global Markets segment offers market-making, financing, securities clearing, settlement, and custody services, as well as risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. As of December 31, 2020, it served approximately 66 million consumer and small business clients with approximately 4,300 retail financial centers; approximately 17,000 ATMs; and digital banking platforms with approximately 39 million active users. The company was founded in 1784 and is headquartered in Charlotte, North Carolina.

CIT Group Company Profile

CIT Group Inc. operates as the holding company for CIT Bank, N.A. that provides banking and related services to commercial and individual customers. The company operates through Commercial Banking and Consumer Banking segments. The Commercial Banking segment provides a range of commercial lending, leasing, and deposit products; loans comprising revolving lines of credit, term loans, unsecured loans, collateral-backed loans, asset-based loans, commercial real estate loans, and cash flow loans; and ancillary services and products, including cash management, capital markets, and advisory services primarily to small and middle market companies. This segment also offers asset management, factoring, receivable management, and secured financing services; supply chain financing, leasing and equipment financing to small businesses and middle market, and railroads and shippers. The Consumer Banking segment provides checking, savings, money market, and individual retirement accounts; time deposits and certificates of deposit; residential mortgage loans; small business administration loans; payment solutions; and fiduciary services. The company also offers leasing and advisory, and online banking services. It operates through a network of approximately 60 branches located in southern California. CIT Group Inc. was founded in 1908 and is based in New York, New York.

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