Contrasting VersaBank (NASDAQ:VBNK) & China Merchants Bank (OTCMKTS:CIHKY)

China Merchants Bank (OTCMKTS:CIHKY) and VersaBank (NASDAQ:VBNK) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, institutional ownership, risk, dividends, earnings and profitability.

Earnings and Valuation

This table compares China Merchants Bank and VersaBank”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
China Merchants Bank	$69.20 billion	2.33	$20.64 billion	$3.90	8.21
VersaBank	$216.31 million	1.55	$29.20 million	$0.79	13.14

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

Analyst Recommendations

This is a breakdown of current recommendations and price targets for China Merchants Bank and VersaBank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
China Merchants Bank	0	0	0	0	0.00
VersaBank	0	2	2	0	2.50

VersaBank has a consensus target price of $13.95, indicating a potential upside of 34.39%. Given VersaBank’s stronger consensus rating and higher probable upside, analysts plainly believe VersaBank is more favorable than China Merchants Bank.

Risk & Volatility

China Merchants Bank has a beta of 0.35, suggesting that its share price is 65% less volatile than the S&P 500. Comparatively, VersaBank has a beta of 0.96, suggesting that its share price is 4% less volatile than the S&P 500.

Institutional & Insider Ownership

56.9% of VersaBank shares are held by institutional investors. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

China Merchants Bank pays an annual dividend of $1.18 per share and has a dividend yield of 3.7%. VersaBank pays an annual dividend of $0.07 per share and has a dividend yield of 0.7%. China Merchants Bank pays out 30.3% of its earnings in the form of a dividend. VersaBank pays out 8.9% 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
China Merchants Bank	30.77%	12.69%	1.23%
VersaBank	10.70%	7.97%	0.76%

Summary

China Merchants Bank beats VersaBank on 8 of the 15 factors compared between the two stocks.

About China Merchants Bank

China Merchants Bank Co., Ltd., together with its subsidiaries, provides various banking products and services. It operates through Wholesale Finance Business, Retail Finance Business, and Other Business segments. The company offers current, demand, time, call, savings, notice, and renminbi accounts. Its loan products include personal commercial real estate, consumption, housing, and car loans; loans to finance for studying abroad; micro-business loans; mortgage loans for equipment; joint guarantee, special guarantee, and housing mortgage loan; bank acceptance, discount, liquid capital, and fixed asset loans; and loans for vessels. The company also offers credit cards; insurance products; open-ended funds; discount and guarantees for commercial bills, redemption of commercial bills, and guaranteed discount for commercial acceptance bills; and financial consultation, debt financing underwriting, merger and acquisition financing, and equity financing and enterprise listing services. In addition, it provides forfeiting and risk participation, escrow, cross-border RMB clearing, and interbank services; and risk and financial management, cross-border RMB and oversea financing, international factoring and settlement, and trade finance services. Further, the company offers financial leasing and guarantee, investment and wealth management, forex option and gold trading, forex express trading, international, offshore and private banking, custody, pension, and electronic banking services. The company also operates in Hong Kong, New York, London, Singapore, Luxembourg, Sydney, and Taipei. China Merchants Bank Co., Ltd. was founded in 1987 and is headquartered in Shenzhen, China.

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.