HDFC Bank (HDB) and WesBanco (WSBC) Critical Analysis

HDFC Bank (NYSE: HDB) and WesBanco (NASDAQ:WSBC) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, dividends, analyst recommendations, valuation and earnings.

Dividends

HDFC Bank pays an annual dividend of $0.49 per share and has a dividend yield of 0.5%. WesBanco pays an annual dividend of $1.04 per share and has a dividend yield of 2.5%. HDFC Bank pays out 18.4% of its earnings in the form of a dividend. WesBanco pays out 48.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. HDFC Bank has increased its dividend for 5 consecutive years.

Profitability

This table compares HDFC Bank and WesBanco’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%
WesBanco 22.43% 7.83% 1.09%

Valuation and Earnings

This table compares HDFC Bank and WesBanco’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HDFC Bank $12.17 billion 7.25 $2.17 billion $2.66 38.80
WesBanco $421.26 million 4.33 $94.48 million $2.15 19.27

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

Analyst Ratings

This is a breakdown of current recommendations and price targets for HDFC Bank and WesBanco, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HDFC Bank 0 0 2 0 3.00
WesBanco 0 5 2 0 2.29

WesBanco has a consensus target price of $42.25, indicating a potential upside of 1.98%. Given WesBanco’s higher probable upside, analysts plainly believe WesBanco is more favorable than HDFC Bank.

Insider and Institutional Ownership

17.4% of HDFC Bank shares are held by institutional investors. Comparatively, 59.2% of WesBanco shares are held by institutional investors. 1.0% of HDFC Bank shares are held by insiders. Comparatively, 4.1% of WesBanco shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

HDFC Bank beats WesBanco on 10 of the 15 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 WesBanco

WesBanco, Inc. (WesBanco) is a bank holding company. The Company offers a range of financial services, including retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. WesBanco offers its services through two segments: community banking, which offers services, such as commercial demand, individual demand and time deposit accounts, as well as commercial, mortgage and individual installment loans, and trust and investment services, which offers trust services, as well as various alternative investment products, including mutual funds. The Community Banking segment also offers insurance and securities brokerage services, among others. As of December 31, 2016, WesBanco operated one commercial bank, WesBanco Bank, Inc. through 174 branches and 163 automated teller machines (ATMs) located in West Virginia, Ohio, western Pennsylvania, Kentucky and southern Indiana.

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