Which Bank Stock is a Smarter Investment?

A few major players dominate the U.S. banking sector, among which Citigroup Inc. C and Wells Fargo & Company WFC are prominent. Both have remained the key competitors in the banking sector, and faced challenges and opportunities influenced by economic conditions and internal strategies.

Of late, C and WFC have experienced significant stock declines due to market reactions to new tariff implementations, reflecting investor concerns about economic slowdowns and their impact on banking operations.

Given such a backdrop, a closer examination of Citigroup and Wells Fargo’s fundamentals, growth prospects and hurdles will help determine which is a smarter investment option right now.

C and WFC are taking different approaches to strengthen their operations and unlock growth opportunities.

Citigroup has been betting on leaner, streamlined operations. The company is emphasizing growth in core businesses through restructuring operations internationally. In April 2021, C announced its plan to exit the consumer banking business in 14 markets across Asia and the EMEA. Since then, the company has exited consumer businesses in nine countries.

Citigroup reached a milestone in December 2024 when it completed the separation of its institutional banking operations in Mexico from the consumer, small business and middle-market segments. These moves by the bank are likely to free up capital to invest in higher-return segments like wealth management and investment banking.

Conversely, Wells Fargo has made strengthening risk management and compliance infrastructure its central goal. Under the leadership of CEO Charlie Scharf, the company is making notable strides in strengthening its compliance framework.

Per a Reuters report from March, investors and analysts are more optimistic that the asset cap (imposed in 2019 after the fake account scandal) on Wells Fargo will be lifted this year, following the bank’s closure of five regulatory actions in 2025 and eleven since 2019. Lifting this asset cap would be a major step, enabling Wells Fargo to fully leverage its size and capabilities, especially in the highly competitive lending space.

As the banking industry adapts to rising expenses, shifting customer preferences, and ongoing digital disruption, Citigroup and Wells Fargo are sharpening their pencils — but their approaches to expense management reflect two different paths.

Citigroup is not just trimming around the edges; it is undergoing a full-fledged transformation under the leadership of CEO Jane Fraser. The company is overhauling its operating model, simplifying reporting structures and streamlining operations.

The transformation process included an organizational restructuring that replaced the reportable segment with five new ones. The reorganization trimmed management layers. In January 2024, C announced the plan to eliminate 20,000 jobs as part of its broad-scale restructuring effort over the next two years.

Driven by these efforts, management expects 2025 and 2026 expenses to be lower than the $56.4 billion reported in 2023.

Alternatively, Wells Fargo is taking a more balanced approach to its operations. While the bank is reducing headcount and streamlining processes, it is also investing in its branch network and upgrading digital tools to augment the customer experience. This allows the bank to maintain a focus  on cost management while enhancing customer service and accessibility.

WFC is being more deliberate about branch location strategy, as the number of branches declined 3% year over year to 4,177 in 2024. Unlike Citigroup, WFC is keen on updating its branches and has already upgraded 730 of them last year. The company plans to update all the branches in the next five years.

With such strategic efforts, Wells Fargo expects $2.4 billion of gross expense reductions in 2025, led by efficiency initiatives.

C and WFC are showcasing strong capital distribution programs that reflect confidence in their liquidity and earnings stability. The companies are required to undergo annual stress tests conducted by the Federal Reserve before announcing any capital distributions.

Citigroup and Wells Fargo hiked their quarterly dividends in July 2024. Citigroup increased its quarterly dividend 6% to 56 cents per share. In the past five years, the company has raised its dividend twice. Similarly, Wells Fargo raised its dividend 14% to 40 cents per share from its prior payout. It has raised its dividend five times in the past five years.

At present, C has a dividend yield of 3.81% and WFC has a yield of 2.58%.

Image Source: Zacks Investment Research

Citigroup also has a share repurchase plan. On Jan. 13, 2025, the bank’s board of directors approved a $20-billion common stock…