HSBC (NYSE:HSBC) and Wells Fargo & Company (NYSE:WFC) Head-To-Head Comparison

Wells Fargo & Company (NYSE:WFC) and HSBC (NYSE:HSBC) are both large-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, earnings, analyst recommendations, valuation, profitability and risk.

Volatility & Risk

Wells Fargo & Company has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, HSBC has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500.

Insider & Institutional Ownership

75.9% of Wells Fargo & Company shares are owned by institutional investors. Comparatively, 1.5% of HSBC shares are owned by institutional investors. 0.1% of Wells Fargo & Company shares are owned by company insiders. Comparatively, 0.0% of HSBC shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

Wells Fargo & Company pays an annual dividend of $2.00 per share and has a dividend yield of 2.4%. HSBC pays an annual dividend of $1.98 per share and has a dividend yield of 2.1%. Wells Fargo & Company pays out 28.2% of its earnings in the form of a dividend. HSBC pays out 28.1% 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. Wells Fargo & Company has increased its dividend for 4 consecutive years. Wells Fargo & Company is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Wells Fargo & Company and HSBC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Wells Fargo & Company	17.64%	14.05%	1.04%
HSBC	18.19%	13.80%	0.83%

Analyst Ratings

This is a summary of recent ratings and target prices for Wells Fargo & Company and HSBC, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Wells Fargo & Company	0	8	15	2	2.76
HSBC	2	11	3	0	2.06

Wells Fargo & Company currently has a consensus price target of $98.08, indicating a potential upside of 19.90%. HSBC has a consensus price target of $97.00, indicating a potential upside of 4.42%. Given Wells Fargo & Company’s stronger consensus rating and higher possible upside, analysts clearly believe Wells Fargo & Company is more favorable than HSBC.

Valuation & Earnings

This table compares Wells Fargo & Company and HSBC”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Wells Fargo & Company	$123.53 billion	2.00	$21.34 billion	$7.09	11.54
HSBC	$131.35 billion	2.42	$22.29 billion	$7.05	13.18

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

Summary

Wells Fargo & Company beats HSBC on 12 of the 18 factors compared between the two stocks.

About Wells Fargo & Company

Wells Fargo & Co. is a diversified and community-based financial services company, which engages in the provision of banking, insurance, investments, mortgage, and consumer and commercial finance products and services. It operates through the following segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. The Consumer Banking and Lending segment offers consumer and small business banking, home lending, credit cards, auto, and personal lending. The Commercial Banking segment provides banking and credit products across industry sectors and municipalities, secured lending and lease products, and treasury management. The Corporate and Investment Banking segment is composed of corporate banking, investment banking, treasury management, commercial real estate lending and servicing, and equity and fixed income solutions, as well as sales, trading, and research capabilities. The Wealth and Investment Management segment refers to personalized wealth management, brokerage, financial planning, lending, private banking, trust, and fiduciary products and services. The company was founded by Henry Wells and William G. Fargo on March 18, 1852 and is headquartered in San Francisco, CA.

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.