Reviewing VersaBank (NASDAQ:VBNK) and HSBC (NYSE:HSBC)

HSBC (NYSE:HSBC) and VersaBank (NASDAQ:VBNK) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, institutional ownership, earnings, dividends, valuation, profitability and analyst recommendations.

Valuation and Earnings

This table compares HSBC and VersaBank”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
HSBC	$131.35 billion	2.20	$22.29 billion	$6.05	13.90
VersaBank	$217.14 million	2.12	$20.32 million	$0.65	22.12

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

Risk & Volatility

HSBC has a beta of 0.5, indicating that its stock price is 50% less volatile than the S&P 500. Comparatively, VersaBank has a beta of 0.93, indicating that its stock price is 7% less volatile than the S&P 500.

Profitability

This table compares HSBC and VersaBank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
HSBC	16.07%	13.10%	0.82%
VersaBank	10.03%	7.70%	0.73%

Dividends

HSBC pays an annual dividend of $1.98 per share and has a dividend yield of 2.4%. VersaBank pays an annual dividend of $0.07 per share and has a dividend yield of 0.5%. HSBC pays out 32.7% of its earnings in the form of a dividend. VersaBank pays out 10.8% 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.

Insider & Institutional Ownership

1.5% of HSBC shares are held by institutional investors. Comparatively, 56.9% of VersaBank shares are held by institutional investors. 0.0% of HSBC shares are held by insiders. Comparatively, 5.3% of VersaBank shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent recommendations for HSBC and VersaBank, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HSBC	0	3	5	1	2.78
VersaBank	0	3	1	0	2.25

HSBC currently has a consensus target price of $63.00, suggesting a potential downside of 25.10%. VersaBank has a consensus target price of $13.00, suggesting a potential downside of 9.60%. Given VersaBank’s higher possible upside, analysts plainly believe VersaBank is more favorable than HSBC.

Summary

HSBC beats VersaBank on 11 of the 17 factors compared between the two stocks.

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.

About VersaBank

VersaBank provides various banking products and services in Canada and the United States. It offers deposit products, such as web-based chequing accounts, guaranteed investment certificates, registered retirement savings plans, and tax-free savings accounts, as well as deposit insurance products. The company also provides lending services, including point of sale financing that covers purchasing loan and lease receivables from finance companies operating in various industries; commercial banking services comprising commercial real estate, public sector/infrastructure financing, and condominium financing; and residential mortgages. In addition, it offers cybersecurity services. The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016. VersaBank was incorporated in 1979 and is headquartered in London, Canada.