Comparing HSBC (NYSE:HSBC) & Itau Unibanco (NYSE:ITUB)

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

Profitability

This table compares HSBC and Itau Unibanco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
HSBC	16.07%	13.10%	0.82%
Itau Unibanco	20.64%	20.83%	1.55%

Dividends

HSBC pays an annual dividend of $8.98 per share and has a dividend yield of 9.8%. Itau Unibanco pays an annual dividend of $0.03 per share and has a dividend yield of 0.4%. HSBC pays out 148.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Itau Unibanco pays out 4.3% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares HSBC and Itau Unibanco”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
HSBC	$131.35 billion	2.39	$22.29 billion	$6.05	15.10
Itau Unibanco	$165.24 billion	0.57	$8.03 billion	$0.70	12.06

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

Risk and Volatility

HSBC has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, Itau Unibanco has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500.

Institutional and Insider Ownership

1.5% of HSBC shares are held by institutional investors. 0.0% of HSBC shares are held by insiders. Comparatively, 0.6% of Itau Unibanco shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for HSBC and Itau Unibanco, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HSBC	0	4	5	1	2.70
Itau Unibanco	0	2	2	0	2.50

HSBC presently has a consensus price target of $63.00, suggesting a potential downside of 31.02%. Itau Unibanco has a consensus price target of $9.00, suggesting a potential upside of 6.57%. Given Itau Unibanco’s higher possible upside, analysts plainly believe Itau Unibanco is more favorable than HSBC.

Summary

HSBC beats Itau Unibanco on 9 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 Itau Unibanco

Itaú Unibanco Holding S.A. offers a range of financial products and services to individuals and corporate customers in Brazil and internationally. The company operates through three segments: Retail Banking, Wholesale Banking, and Activities with the Market + Corporation. It offers current account; loans; credit and debit cards; investment and commercial banking services; real estate lending services; financing and investment services; economic, financial and brokerage advisory; and leasing and foreign exchange services. The company also provides property and casualty insurance products covering loss, damage, or liabilities for assets or persons, as well as life insurance products covering death and personal accident. It serves retail customers, account and non-account holders, individuals and legal entities, high income clients, microenterprises, and small companies, as well as middle-market companies and high net worth clients. The company was formerly known as Itaú Unibanco Banco Múltiplo S.A. and changed its name to Itaú Unibanco Holding S.A. in April 2009. The company was incorporated in 1924 and is headquartered in São Paulo, Brazil. Itaú Unibanco Holding S.A. operates as a subsidiary of IUPAR – Itaú Unibanco Participações S.A.