Analyzing HSBC (NYSE:HSBC) & China Construction Bank (OTCMKTS:CICHY)

China Construction Bank (OTCMKTS:CICHY) 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, valuation, profitability, earnings, risk and analyst recommendations.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
China Construction Bank	25.63%	9.81%	0.78%
HSBC	12.85%	12.78%	0.81%

Dividends

China Construction Bank pays an annual dividend of $0.80 per share and has a dividend yield of 4.1%. HSBC pays an annual dividend of $1.98 per share and has a dividend yield of 2.5%. China Construction Bank pays out 22.2% of its earnings in the form of a dividend. HSBC pays out 41.7% 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. China Construction Bank is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations for China Construction Bank and HSBC, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
China Construction Bank	0	1	0	0	2.00
HSBC	0	5	6	2	2.77

HSBC has a consensus price target of $63.00, indicating a potential downside of 20.81%. Given HSBC’s stronger consensus rating and higher possible upside, analysts plainly believe HSBC is more favorable than China Construction Bank.

Institutional & Insider Ownership

1.5% of HSBC shares are held by institutional investors. 0.0% of HSBC shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Volatility and Risk

China Construction Bank has a beta of 0.11, meaning that its share price is 89% less volatile than the S&P 500. Comparatively, HSBC has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Earnings and Valuation

This table compares China Construction Bank and HSBC”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
China Construction Bank	$188.88 billion	1.28	$46.68 billion	$3.60	5.39
HSBC	$141.75 billion	1.93	$23.98 billion	$4.75	16.75

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

Summary

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

About China Construction Bank

China Construction Bank Corporation provides various banking and related financial services to individuals and corporate customers in the People's Republic of China and internationally. It operates through Corporate Finance Business, Personal Finance Business, Treasury and Asset Management Business, and Others segments. The company accepts various deposits, such as foreign currency, all in one accounts, RMB, corporate term and notification, and corporate demand deposits, as well corporate deposits by agreement. Its loan products include personal business, car, and housing loans; and SME, traditional credit, commercial draft, buyer credit, and RMB credit line loans. The company also offers credit cards; physical gold for personal investment and personal gold accounts; foreign exchange services; certificate treasury and savings bonds, securities deposit accounts, and securities services, as well as bank-securities transfer and book-entry treasury bond over the counter transaction services; and wealth management products. In addition, it provides collection, salaries payment, third-party collection and payment, insurance agency, and remittance services; international settlement and financing, and FI services; securities and fund settlement services; guarantee-based, consulting and advising, and factoring services; fund custody services; and e-banking services. Further, the company offers institutional services comprising services for government agencies, social security, banks cooperation, bank-securities cooperation, bank-insurance cooperation, and services for non-banking financial institutions. China Construction Bank Corporation was founded in 1954 and is headquartered in Beijing, the People's Republic of China.

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.