Since another round of one-off capital injections are set to prop up Citigroup (C) – again – and now Bank of America (BAC), I thought it would be interesting to see how the larger financial stocks have performed over two periods. The first is since the local bottom on July 15, 2008, and the second is off the original “Citi rescue bottom” on November 20, 2008.

For clarity of display, I’ve grouped the largest components of the Financial ETF (XLF) in order of size. Every stock here comprises at least 1% of that index; the first image will show the performance of the group since July and the second will show the performance of the same group since November.

Citigroup has been the worst performer here by far; Wells Fargo (WFC) is essentially flat over that same time and US Bancorp (USB) is the next best performer, down 16%. Those were relatively easy calls.

Shorter-term, Goldman Sachs (GS) is the only stock significantly higher. Pretty much everything else has been flat to down.

The next group is more insurance heavy, but the returns are pretty similar. Only Travelers (TRV) and PNC are down less than 20%.

The opposite story is true lately though; all of these stocks have done fantastically well since the November lows. Morgan Stanley (MS) and Metlife (MET) are both up around 80%.

The next grouping is a more mixed bag, with the best performer being a relatively flat BB&T (BBT) to Prudential (PRU), which has recovered from its lows but is still off 50%.

Since the November lows though, this grouping has been led by rallies from Prudential and Allstate (ALL). Most other stocks are flat.

The final grouping is the six stocks with the smallest allocations, yet still comprising over 1% of the XLF index. There is diversity of business lines in this group, but they are still down 20% to 40% in the last six months.

The near-term performance has been fairly strong, however, ranging from flat to +40%.

And that leaves us with the XLF, which is breaking down to test its November lows – mostly because the stock prices of the largest components are collapsing, as is clear from the divergences detailed above.

It’s obvious the market is not buying the solvency of the Big Four “Too Big to Fail” banks. Will the government take a different approach this time around with Citi and Bank of America? I can only hope so, as $25 billion plus a potential huge liability from asset guarantees gets expensive when it only buys the investing public’s calm for two months at a time. Reversing the bank consolidation of days past is an eventual step in the right direction; the dismantling of Citigroup is a baby step in that direction. But right now, the Treasury seems to believe it needs a handful of large banks to absorb smaller, failing competitors… and all that seems to be doing is further concentrating the risk of a large and costly failure into a smaller number of firms.

Here’s hoping for more clarity going into the weekend…

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