Critical Analysis: Standard Chartered (OTCMKTS:SCBFF) and Bank of Nova Scotia (NYSE:BNS)

Standard Chartered (OTCMKTS:SCBFF) and Bank of Nova Scotia (NYSE:BNS) are both large-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, earnings, dividends, analyst recommendations, risk, valuation and institutional ownership.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Standard Chartered and Bank of Nova Scotia, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Standard Chartered	0	2	3	0	2.60
Bank of Nova Scotia	0	3	2	0	2.40

Bank of Nova Scotia has a consensus price target of $106.00, suggesting a potential upside of 39.72%. Given Bank of Nova Scotia’s higher probable upside, analysts plainly believe Bank of Nova Scotia is more favorable than Standard Chartered.

Profitability

This table compares Standard Chartered and Bank of Nova Scotia’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Standard Chartered	12.86%	10.77%	0.64%
Bank of Nova Scotia	12.40%	12.49%	0.67%

Insider and Institutional Ownership

49.1% of Bank of Nova Scotia shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Standard Chartered and Bank of Nova Scotia”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Standard Chartered	$39.53 billion	1.39	$5.09 billion	$1.88	12.85
Bank of Nova Scotia	$52.70 billion	1.77	$5.56 billion	$4.81	15.77

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

Volatility & Risk

Standard Chartered has a beta of 0.58, suggesting that its stock price is 42% less volatile than the S&P 500. Comparatively, Bank of Nova Scotia has a beta of 1.1, suggesting that its stock price is 10% more volatile than the S&P 500.

Dividends

Standard Chartered pays an annual dividend of $0.98 per share and has a dividend yield of 4.1%. Bank of Nova Scotia pays an annual dividend of $3.16 per share and has a dividend yield of 4.2%. Standard Chartered pays out 52.1% of its earnings in the form of a dividend. Bank of Nova Scotia pays out 65.7% 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. Bank of Nova Scotia has raised its dividend for 14 consecutive years. Bank of Nova Scotia is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Bank of Nova Scotia beats Standard Chartered on 12 of the 16 factors compared between the two stocks.

About Standard Chartered

Standard Chartered PLC, together with its subsidiaries, provides various banking products and services in Asia, Africa, the Middle East, Europe, and the Americas. The company operates in three segments: Corporate, Commercial & Institutional Banking; Consumer, Private & Business Banking; and Ventures. It offers retail products, such as deposits, mortgages, credit cards, and personal loans; wealth management products and services that include investments, portfolio management, insurance, and wealth advice; and transaction banking services, such as cash management, working capital, and trade financing products. The company provides financial markets products and services that comprise project and export financing; debt capital markets and leveraged financing; financing and securities services; sales and structuring; macro, commodities, and credit trading; and market research services. In addition, it offers digital banking solutions. It serves financial institutions, governments, banks, investors, corporations, small to medium-sized businesses, and individuals. Standard Chartered PLC was founded in 1853 and is headquartered in London, the United Kingdom.

About Bank of Nova Scotia

The Bank of Nova Scotia provides various banking products and services in Canada, the United States, Mexico, Peru, Chile, Colombia, the Caribbean and Central America, and internationally. It operates through Canadian Banking, International Banking, Global Wealth Management, and Global Banking and Markets segments. The company offers financial advice and solutions, and banking products, including debit and credit cards, chequing and saving accounts, investments, mortgages, loans, and insurance to individuals; and retail automotive financing solutions. It also provides business banking solutions comprising lending, deposit, cash management, and trade finance solutions to small, medium, and large businesses. In addition, it provides wealth management advice and solutions, including online brokerage, mobile investment, full-service brokerage, trust, private banking, and private investment counsel services; and retail mutual funds, exchange traded funds, liquid alternatives, and institutional funds. The Bank of Nova Scotia was founded in 1832 and is headquartered in Toronto, Canada.