Can Lloyds Banking Group PLC (ADR) (LYG) Outperform Citigroup? – Citigroup Inc. (C)

3. Growth
Even if your main interest is value or income investing, you do need to consider growth. At the very least, a company needs to deliver growth in line with inflation — and realistically, most successful companies need to grow ahead of inflation if they are to protect their market share and profit margins.

How do Lloyds Banking Group PLC (ADR) (NYSE:LYG) and Citigroup Inc. (NYSE:C) shape up in terms of growth?

Since the five-year share price return figures include the pre-financial crisis period, I’ve also added in a row for three-year share price return, which I think shows more clearly the difference between the two companies. There’s no clear winner between these two in terms of growth — both have profitable core businesses and legacy problems that are causing huge losses each year, but at present, Lloyds’ situation is worse.

Should you buy Lloyds or Citigroup?
In my view, Citigroup Inc. (NYSE:C) is considerably further along the road to recovery than Lloyds. Citi’s CEO Michael Corbat was appointed last year after the previous incumbent, Vikram Pandit, was encouraged to resign. Corbat has initiated wide-ranging changes that have seen the bank cut costs, reduce its headcount, and clearly define the non-core assets it wants to sell. Unlike at Lloyds, profits from Citi’s core business are big enough to outweigh its losses, which I believe should help Citigroup deliver strong returns to shareholders as its financial situation continues to strengthen.

My buy — for both income and growth — would be Citigroup Inc. (NYSE:C), but banks’ finances are notoriously complex, and if you would prefer a profitable business whose affairs are easier to understand, then you may want to take a look at the home-grown business I mention below, which has outperformed both Lloyds Banking Group PLC (ADR) (NYSE:LYG) and Citigroup by a big margin in recent years.

The article Can Lloyds Banking Outperform Citigroup? originally appeared on Fool.com and is written by Roland Head.

Roland does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares of Citigroup.

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