Rewarding Investors

Investors have rewarded management teams that presented the most ambitious restructuring efforts.

Citigroup, the third-biggest U.S. bank by assets, climbed 4.8 percent in the two days after its board ousted Chief Executive Officer Vikram Pandit, 55. Earlier this year, shareholders cast a non-binding vote rejecting Pandit’s compensation package. The stock also jumped 6.3 percent when his replacement, Michael Corbat, 52, said the New York-based bank would cut 11,000 jobs.

After Switzerland’s UBS said it would jettison most of its fixed-income business and cut as many as 10,000 jobs, the Zurich-based bank’s stock price climbed above book value for the first time in 15 months. Many of its rivals, including JPMorgan and Goldman Sachs, haven’t traded above that level all year. Book value is an estimate of how much the bank’s assets would be worth minus all of its liabilities.

Pendulum Swings

Even after gains this year, shares of the nine banks still trade at depressed levels as investors question their ability to boost profits. Total return to shareholders, which includes price gains as well as dividends, has been negative since the end of 2008 at Charlotte, North Carolina-based Bank of America, Citigroup and Credit Suisse. Only Barclays has beaten the S&P 500 Index in that period.

For bondholders, the Bank of America Merrill Lynch Global Large Cap Banking Index has produced a total return of 13.8 percent this year, beating the 10.8 percent return on the broader Global Large Cap Corporate Index. It was the first time the bank index outperformed the corporate benchmark since 2008.

“The pendulum has totally, totally swung,” said Davide Serra, a managing partner at London-based Algebris Investments LLP, which he said has profited this year by buying bonds of some of the world’s largest banks. “It’s better to be a bondholder than an employee.”

Blankfein Pay

Goldman Sachs and Morgan Stanley, the fifth- and sixth- biggest U.S. banks by assets, began holding conference calls for bondholders this year. Goldman, which hadn’t raised its dividend since 2006, has lifted the payout twice since January.