Citigroup and Wells Fargo Trade In Opposite Directions As Goldman Upgrades One and Downgrades The Other

A couple of ratings changes from Goldman Sachs in the large-cap bank sector is creating a stir this morning. Goldman upgraded Citigroup (NYSE: C), while downgrading Wells Fargo (NYSE: WFC).

Citigroup's rating went from Neutral to Buy at Goldman, and their price target was maintained at $4.50.

Citigroup joins Bank of America (NYSE: BAC) and JP Morgan Chase (NYSE: JPM) as the top-rated big banks. BAC and JPM are both on the Conviction Buy List, a step above a 'Buy' rating. The firm said there are two themes that keeps them positive on universal banks – "the turn in consumer credit, and prospects for a good capital markets quarter."

The firm said an issue that remains for large-cap banks is resolution authority and the resulting risk of rating agency downgrades. Ratings have been boosted by government support, and S&P has not clarified if ratings will fall once government support is removed via the passage of resolution authority.

The firm downgraded Wells Fargo (NYSE: WFC) from Buy to Neutral, saying while the bank has a lot of earnings power, they see more relative value in Bank of America, JPMorgan Chase and Citigroup. The firm also sees near-term risks at Wells, including the over-earning of the mortgage servicing business.

Shares of Citigroup are up 2.8% today, while Wells Fargo is down 3.4%.

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