Head-To-Head Review: HDFC Bank (HDB) vs. Provident Financial (PROV)

HDFC Bank (NYSE: HDB) and Provident Financial (NASDAQ:PROV) are both financials companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, earnings, analyst recommendations, dividends, profitability, risk and valuation.

Dividends

HDFC Bank pays an annual dividend of $0.49 per share and has a dividend yield of 0.5%. Provident Financial pays an annual dividend of $0.56 per share and has a dividend yield of 3.1%. HDFC Bank pays out 40.2% of its earnings in the form of a dividend. Provident Financial pays out 136.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. HDFC Bank has increased its dividend for 5 consecutive years.

Earnings and Valuation

This table compares HDFC Bank and Provident Financial’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HDFC Bank $12.17 billion 7.62 $2.17 billion $1.22 88.91
Provident Financial $73.24 million 1.90 $5.20 million $0.41 44.51

HDFC Bank has higher revenue and earnings than Provident Financial. Provident Financial is trading at a lower price-to-earnings ratio than HDFC Bank, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares HDFC Bank and Provident Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HDFC Bank 18.00% 15.22% 1.74%
Provident Financial 4.82% 3.84% 0.41%

Insider and Institutional Ownership

17.4% of HDFC Bank shares are owned by institutional investors. Comparatively, 60.0% of Provident Financial shares are owned by institutional investors. 1.0% of HDFC Bank shares are owned by insiders. Comparatively, 12.7% of Provident Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for HDFC Bank and Provident Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HDFC Bank 0 1 2 0 2.67
Provident Financial 0 1 0 0 2.00

Provident Financial has a consensus target price of $20.00, indicating a potential upside of 9.59%. Given Provident Financial’s higher possible upside, analysts clearly believe Provident Financial is more favorable than HDFC Bank.

Summary

HDFC Bank beats Provident Financial on 12 of the 16 factors compared between the two stocks.

About HDFC Bank

HDFC Bank Limited (the Bank) is a holding company. The Bank offers a range of banking services covering commercial and investment banking on the wholesale side and transactional/branch banking on the retail side. It also offers financial services. The Bank’s segments include Treasury, Retail banking, Wholesale banking and Other banking business. The Treasury segment primarily consists of net interest earnings from the Bank’s investment portfolio, money market borrowing and lending, gains or losses on investment operations and on account of trading in foreign exchange and derivative contracts. The Retail Banking segment serves retail customers through a branch network and other delivery channels, as well as through alternative delivery channels. The Bank provides its corporate and institutional clients a range of commercial and transactional banking products. The Other banking business segment includes income from para banking activities.

About Provident Financial

Provident Financial Holdings, Inc. is the holding company of Provident Savings Bank, F.S.B. (the Bank). The Bank is a federally chartered stock savings bank. The Company operates through two segments: Provident Bank and Provident Bank Mortgage (PBM). The Bank’s operations primarily consist of accepting deposits from customers within the communities surrounding the Bank’s full service offices and investing those funds in single-family loans, multi-family loans, commercial real estate loans, construction loans, commercial business loans, consumer loans and other mortgage loans. PBM operations primarily consist of the origination, purchase and sale of mortgage loans secured by single-family residences. The Bank is a financial services company committed to serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank offers business checking accounts, other business banking services and services loans for others.

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