Critical Contrast: Credicorp (NYSE:BAP) versus Bank of China (OTCMKTS:BACHY)

Bank of China (OTCMKTS:BACHY) and Credicorp (NYSE:BAP) are both large-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, valuation, institutional ownership, dividends, risk and earnings.

Volatility and Risk

Bank of China has a beta of 0.11, suggesting that its stock price is 89% less volatile than the S&P 500. Comparatively, Credicorp has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Bank of China and Credicorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of China	0	1	0	1	3.00
Credicorp	0	3	4	1	2.75

Credicorp has a consensus price target of $276.60, suggesting a potential downside of 4.36%. Given Credicorp’s higher probable upside, analysts plainly believe Credicorp is more favorable than Bank of China.

Institutional and Insider Ownership

89.8% of Credicorp shares are held by institutional investors. 15.9% of Credicorp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Bank of China pays an annual dividend of $0.55 per share and has a dividend yield of 3.8%. Credicorp pays an annual dividend of $11.01 per share and has a dividend yield of 3.8%. Bank of China pays out 21.4% of its earnings in the form of a dividend. Credicorp pays out 49.6% 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. Credicorp has raised its dividend for 3 consecutive years. Bank of China is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Bank of China and Credicorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of China	$174.63 billion	0.97	$33.08 billion	$2.57	5.60
Credicorp	$7.00 billion	3.29	$1.47 billion	$22.19	13.03

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Bank of China	19.65%	7.81%	0.66%
Credicorp	23.59%	19.50%	2.68%

Summary

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

About Bank of China

Bank of China Limited, together with its subsidiaries, provides various banking and financial services in Chinese Mainland, Hong Kong, Macao, Taiwan, and internationally. It operates through six segments: Corporate Banking, Personal Banking, Treasury Operations, Investment Banking, Insurance, and Other. The Corporate Banking segment provides current accounts, deposits, overdrafts, loans, payments and settlements, trade-related products, and other credit facilities, as well as foreign currency, derivative, and wealth management products for corporate customers, government authorities, and financial institutions. The Personal Banking segment offers savings deposits, personal loans, credit cards and debit cards, payments and settlements, wealth management, and funds and insurance agency services to retail customers. The Treasury Operations segment offers foreign exchange transactions, customer-based interest rate, and foreign exchange derivative transactions, as well as money market transactions, proprietary trading, and asset and liability management. The Investment Banking segment provides debt and equity underwriting and financial advisory, sale and trading of securities, stock brokerage, investment research, asset management services, and private equity investment services. The Insurance segment provides underwriting services for general and life insurance business, and insurance agency services. In addition, the company operates debt-to-equity swaps and other supporting, and aircraft and financial leasing business. The company was founded in 1912 and is headquartered in Beijing, China.

About Credicorp

Credicorp Ltd. provides various financial, insurance, and health services and products primarily in Peru and internationally. It operates through Universal Banking, Insurance and Pensions, Microfinance, and Investment Banking and Equity Management segments. The Universal Banking segment grants various credits and financial instruments to individuals and legal entities; and various deposits and current accounts. The Insurance and Pensions segment issues insurance policies to cover losses in commercial property, transport, marine vessels, automobiles, life, health, and pensions; and management services for private pension funds. The Microfinance segment provides management of loans, deposits, and current accounts for small and microenterprises. The Investment Banking and Equity Management segment is involved in provision of brokerage and investment management services for corporations, institutional investors, governments, and foundations; structuring and placement of issues in the primary market; execution and negotiation of transactions in the secondary market; and structuring of securitization processes for corporate customers and manages mutual funds. The company was founded in 1889 and is headquartered in Lima, Peru.