Analyzing Sumitomo Mitsui Financial Grp (SMFG) & HDFC Bank (HDB)

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Sumitomo Mitsui Financial Grp (NYSE:SMFG) and HDFC Bank (NYSE:HDB) are both large-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, profitability, dividends, risk and earnings.

Dividends

Sumitomo Mitsui Financial Grp pays an annual dividend of $0.26 per share and has a dividend yield of 3.3%. HDFC Bank pays an annual dividend of $0.55 per share and has a dividend yield of 0.6%. Sumitomo Mitsui Financial Grp pays out 25.7% of its earnings in the form of a dividend. HDFC Bank pays out 17.7% 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. HDFC Bank has raised its dividend for 5 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Sumitomo Mitsui Financial Grp and HDFC Bank, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sumitomo Mitsui Financial Grp 0 0 0 0 N/A
HDFC Bank 0 0 0 0 N/A

Volatility & Risk

Sumitomo Mitsui Financial Grp has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, HDFC Bank has a beta of 0.88, suggesting that its stock price is 12% less volatile than the S&P 500.

Valuation and Earnings

This table compares Sumitomo Mitsui Financial Grp and HDFC Bank’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sumitomo Mitsui Financial Grp $52.05 billion 1.07 $6.93 billion $1.01 7.81
HDFC Bank $14.81 billion 5.35 $2.74 billion $3.11 29.60

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

Insider and Institutional Ownership

2.6% of Sumitomo Mitsui Financial Grp shares are held by institutional investors. Comparatively, 17.2% of HDFC Bank shares are held by institutional investors. 1.0% of HDFC Bank shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Sumitomo Mitsui Financial Grp and HDFC Bank’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sumitomo Mitsui Financial Grp 12.31% 6.47% 0.39%
HDFC Bank 18.32% 15.01% 1.55%

Summary

HDFC Bank beats Sumitomo Mitsui Financial Grp on 10 of the 14 factors compared between the two stocks.

Sumitomo Mitsui Financial Grp Company Profile

Sumitomo Mitsui Financial Group, Inc., together with its subsidiaries, provides commercial banking, leasing, securities, consumer finance, and other services primarily in Japan. It operates through four segments: Wholesale Business, Retail Business, International Business, and Global Markets Business. The Wholesale Business segment provides financing, investment management, risk hedging and settlement services, as well as financial solutions for mergers and acquisition and other advisory services and leasing, primarily for large-and mid-sized corporate clients; and various leasing services, including equipment, and operating and leveraged leasing. The Retail Business segment offers wealth management, settlement services, consumer finance, and housing loans. The International Business segment provides loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives, and global cash management services; underwriting services; and leasing services related to the construction machinery, transportation equipment, industrial machinery, medical equipment, and aircraft leasing. As of March 31, 2018, this segment's network consisted of 18 branches, 22 sub-branches, and 4 representative offices. The Global Markets Business segment offers foreign exchange products, derivatives, bonds, stocks and other marketable financial products, and undertakes asset liability management operations. It also offers system development, data processing, management consulting, and economic research services; and investment advisory and investment trust management services. The company was founded in 1590 and is headquartered in Tokyo, Japan.

HDFC Bank Company Profile

HDFC Bank Limited provides a range of banking and financial services to individuals and businesses in India, Bahrain, Hong Kong, and Dubai. The company operates in Treasury, Retail Banking, Wholesale Banking, and Other Banking Business segments. It accepts savings accounts, salary accounts, current accounts, fixed and recurring deposits, demat accounts, safe deposit lockers, and rural accounts, as well as offshore accounts and deposits. The company also offers personal, business, home, consumer durable, car, two wheeler, gold, educational, rural, and term loans; loans for professionals; loans against property, securities, and assets; overdrafts; government sponsored programs; and working capital, healthcare, channel, short term, structured, dealer, and vendor finance, as well as agricultural lending. In addition, it provides credit, debit, and prepaid cards; private banking services; export, import, remittance, bank guarantees, and letter of credit services, as well as merchant and cash management services; life, health, motor, travel, and home insurance products; and investment products, such as mutual funds, equities and derivatives, IPOs, and bonds. Further, the company offers bill discounting, real time gross settlement, bankers to right/public issue, forex, money market, employees trusts, and tax collection services; and investment banking services in the areas of project appraisal, structured finance, loan syndication, debt capital markets, equity placement, mergers and acquisitions, corporate advisory, and capital market advisory services. Additionally, it provides correspondent banking, settlement, custodial, disbursement, clearing, and administrative and fiduciary support services, as well as online and mobile banking services. As of March 31, 2018, the company operated a network of 4,787 branches and 12,635 ATMs in 2,691 cities/towns. HDFC Bank Limited was founded in 1994 and is based in Mumbai, India.

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