HDFC Bank (HDB) & Bank of America (BAC) Critical Analysis

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

Dividends

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HDFC Bank pays an annual dividend of $0.49 per share and has a dividend yield of 0.5%. Bank of America pays an annual dividend of $0.48 per share and has a dividend yield of 1.6%. Bank of America pays out 31.0% of its earnings in the form of a dividend. HDFC Bank has raised its dividend for 4 consecutive years and Bank of America has raised its dividend for 5 consecutive years. Bank of America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares HDFC Bank and Bank of America’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HDFC Bank $12.17 billion 6.91 $2.17 billion N/A N/A
Bank of America $100.26 billion 3.12 $18.23 billion $1.55 19.71

Bank of America has higher revenue and earnings than HDFC Bank.

Volatility and Risk

HDFC Bank has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.Comparatively, Bank of America has a beta of 1.36, indicating that its stock price is 36% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
HDFC Bank 18.23% 16.17% 1.83%
Bank of America 18.03% 8.54% 0.93%

Analyst Ratings

This is a breakdown of current ratings and price targets for HDFC Bank and Bank of America, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HDFC Bank 0 0 2 0 3.00
Bank of America 0 7 13 0 2.65

Bank of America has a consensus price target of $30.81, suggesting a potential upside of 0.84%. Given Bank of America’s higher possible upside, analysts plainly believe Bank of America is more favorable than HDFC Bank.

Institutional & Insider Ownership

17.3% of HDFC Bank shares are owned by institutional investors. Comparatively, 69.8% of Bank of America shares are owned by institutional investors. 1.0% of HDFC Bank shares are owned by company insiders. Comparatively, 0.1% of Bank of America shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

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 Bank of America

Bank of America Corporation is a bank holding company and a financial holding company. The Company is a financial institution, serving individual consumers and others with a range of banking, investing, asset management and other financial and risk management products and services. The Company, through its banking and various non-bank subsidiaries, throughout the United States and in international markets, provides a range of banking and non-bank financial services and products through four business segments: Consumer Banking, which comprises Deposits and Consumer Lending; Global Wealth & Investment Management, which consists of two primary businesses: Merrill Lynch Global Wealth Management and U.S. Trust, Bank of America Private Wealth Management; Global Banking, which provides a range of lending-related products and services; Global Markets, which offers sales and trading services, and All Other, which consists of equity investments, residual expense allocations and other.

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