Reviewing Bank of America (NYSE:BAC) & HSBC (NYSE:HSBC)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
HSBC	18.19%	13.80%	0.83%
Bank of America	17.56%	12.20%	0.98%

Dividends

HSBC pays an annual dividend of $1.98 per share and has a dividend yield of 2.0%. Bank of America pays an annual dividend of $1.28 per share and has a dividend yield of 2.3%. HSBC pays out 28.1% of its earnings in the form of a dividend. Bank of America pays out 29.4% 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. Bank of America has increased its dividend for 11 consecutive years. Bank of America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HSBC	1	9	2	0	2.08
Bank of America	0	6	21	0	2.78

Bank of America has a consensus price target of $64.08, indicating a potential upside of 15.62%. Given Bank of America’s stronger consensus rating and higher probable upside, analysts clearly believe Bank of America is more favorable than HSBC.

Volatility and Risk

HSBC has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500. Comparatively, Bank of America has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500.

Valuation & Earnings

This table compares HSBC and Bank of America”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
HSBC	$131.35 billion	2.65	$22.29 billion	$7.05	14.35
Bank of America	$191.57 billion	2.02	$30.51 billion	$4.36	12.71

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

Insider & Institutional Ownership

1.5% of HSBC shares are held by institutional investors. Comparatively, 70.7% of Bank of America shares are held by institutional investors. 0.0% of HSBC shares are held by insiders. Comparatively, 0.3% of Bank of America shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Bank of America beats HSBC on 11 of the 17 factors compared between the two stocks.

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.

About Bank of America

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, non-interest and interest-bearing checking accounts, and investment accounts and products; credit and debit cards; residential mortgages, and home equity loans; and direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The GWIM segment provides investment management, brokerage, banking, and trust and retirement products and services; wealth management solutions; and customized solutions, including specialty asset management services. The Global Banking segment offers lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, short-term investing options, and merchant services; working capital management solutions; debt and equity underwriting and distribution, and merger-related and other advisory services; and fixed-income and equity research, and certain market-based services. The Global Markets segment provides market-making, financing, securities clearing, settlement, and custody services; securities and derivative products; and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1784 and is based in Charlotte, North Carolina.