Head-To-Head Contrast: HSBC (NYSE:HSBC) & China Merchants Bank (OTCMKTS:CIHKY)

China Merchants Bank (OTCMKTS:CIHKY) and HSBC (NYSE:HSBC) are both large-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, profitability, valuation, risk, institutional ownership and earnings.

Dividends

China Merchants Bank pays an annual dividend of $1.18 per share and has a dividend yield of 3.6%. HSBC pays an annual dividend of $1.98 per share and has a dividend yield of 2.5%. China Merchants Bank pays out 29.9% of its earnings in the form of a dividend. HSBC pays out 41.7% 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. China Merchants Bank is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

China Merchants Bank has a beta of 0.24, suggesting that its stock price is 76% less volatile than the S&P 500. Comparatively, HSBC has a beta of 0.52, suggesting that its stock price is 48% less volatile than the S&P 500.

Insider & Institutional Ownership

1.5% of HSBC shares are held by institutional investors. 0.0% of HSBC shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares China Merchants Bank and HSBC”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
China Merchants Bank	$69.20 billion	2.39	$20.64 billion	$3.94	8.33
HSBC	$141.75 billion	1.95	$23.98 billion	$4.75	16.91

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

Profitability

This table compares China Merchants Bank and HSBC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
China Merchants Bank	32.06%	12.04%	1.19%
HSBC	12.85%	12.78%	0.81%

Analyst Recommendations

This is a summary of recent recommendations and price targets for China Merchants Bank and HSBC, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
China Merchants Bank	0	0	0	0	0.00
HSBC	0	5	6	2	2.77

HSBC has a consensus price target of $63.00, indicating a potential downside of 21.56%. Given HSBC’s stronger consensus rating and higher probable upside, analysts clearly believe HSBC is more favorable than China Merchants Bank.

Summary

HSBC beats China Merchants Bank on 12 of the 17 factors compared between the two stocks.

About China Merchants Bank

China Merchants Bank Co., Ltd., together with its subsidiaries, provides various banking products and services. It operates through Wholesale Finance Business, Retail Finance Business, and Other Business segments. The company offers current, demand, time, call, savings, notice, and renminbi accounts. Its loan products include personal commercial real estate, consumption, housing, and car loans; loans to finance for studying abroad; micro-business loans; mortgage loans for equipment; joint guarantee, special guarantee, and housing mortgage loan; bank acceptance, discount, liquid capital, and fixed asset loans; and loans for vessels. The company also offers credit cards; insurance products; open-ended funds; discount and guarantees for commercial bills, redemption of commercial bills, and guaranteed discount for commercial acceptance bills; and financial consultation, debt financing underwriting, merger and acquisition financing, and equity financing and enterprise listing services. In addition, it provides forfeiting and risk participation, escrow, cross-border RMB clearing, and interbank services; and risk and financial management, cross-border RMB and oversea financing, international factoring and settlement, and trade finance services. Further, the company offers financial leasing and guarantee, investment and wealth management, forex option and gold trading, forex express trading, international, offshore and private banking, custody, pension, and electronic banking services. The company also operates in Hong Kong, New York, London, Singapore, Luxembourg, Sydney, and Taipei. China Merchants Bank Co., Ltd. was founded in 1987 and is headquartered in Shenzhen, China.

About HSBC

HSBC Holdings plc provides banking and financial services worldwide. The company operates through Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets segments. The Wealth and Personal Banking segment offers retail banking and wealth products, including current and savings accounts, mortgages and personal loans, credit and debit cards, and local and international payment services; and wealth management services comprising insurance and investment products, global asset management services, investment management, and private wealth solutions. This segment serves personal banking and high net worth individuals. The Commercial Banking segment provides credit and lending, treasury management, payment, cash management, commercial insurance, and investment services; commercial cards; international trade and receivables finance services; foreign exchange products; capital raising services on debt and equity markets; and advisory services. It serves small and medium sized enterprises, mid-market enterprises, and corporates. The Global Banking and Markets segment offers financing, advisory, and transaction services; and credit, rates, foreign exchange, equities, money markets, and securities services; and engages in principal investment activities. It serves government, corporate and institutional clients, and private investors. HSBC Holdings plc was founded in 1865 and is headquartered in London, the United Kingdom.