Critical Review: Shinhan Financial Group (NYSE:SHG) and Bank of China (OTCMKTS:BACHY)

Shinhan Financial Group (NYSE:SHG) and Bank of China (OTCMKTS:BACHY) are both large-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, analyst recommendations, risk, profitability, institutional ownership, valuation and earnings.

Dividends

Shinhan Financial Group pays an annual dividend of $1.55 per share and has a dividend yield of 2.5%. Bank of China pays an annual dividend of $0.55 per share and has a dividend yield of 3.4%. Shinhan Financial Group pays out 16.8% of its earnings in the form of a dividend. Bank of China pays out 21.4% 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.

Risk and Volatility

Shinhan Financial Group has a beta of 0.93, indicating that its share price is 7% less volatile than the S&P 500. Comparatively, Bank of China has a beta of 0.06, indicating that its share price is 94% less volatile than the S&P 500.

Valuation & Earnings

This table compares Shinhan Financial Group and Bank of China”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shinhan Financial Group	$23.83 billion	1.25	$3.48 billion	$9.21	6.84
Bank of China	$169.73 billion	1.23	$33.81 billion	$2.57	6.29

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

Insider & Institutional Ownership

7.8% of Shinhan Financial Group shares are held by institutional investors. 1.0% of Shinhan Financial Group shares are held by company 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.

Profitability

This table compares Shinhan Financial Group and Bank of China’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shinhan Financial Group	20.07%	10.97%	0.85%
Bank of China	20.09%	7.81%	0.67%

Analyst Ratings

This is a summary of recent ratings for Shinhan Financial Group and Bank of China, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shinhan Financial Group	0	1	1	0	2.50
Bank of China	0	1	0	0	2.00

Summary

Shinhan Financial Group beats Bank of China on 11 of the 15 factors compared between the two stocks.

About Shinhan Financial Group

Shinhan Financial Group Co., Ltd. provides financial products and services in South Korea and internationally. The company operates through six segments: Banking, Credit Card, Securities, Insurance, Credit, and Others. It offers retail banking services, including demand, savings, and fixed deposit-taking; checking accounts; mortgage and home equity, and retail lending; electronic banking and automatic teller machines (ATM); and bill paying, payroll and check-cashing, currency exchange, and wire fund transfer services. The company also provides corporate banking services, such as investment banking, real estate financing, overseas real estate and development project financing, infrastructure and structured financing, equity/venture investments, mergers and acquisitions consulting; securitization and derivatives services comprising securities and derivative products, and foreign exchange trading; business expansion financing and consulting services; and working capital loans and facilities loans. In addition, it is involved in treasury and investment activities in international capital markets consisting of foreign currency-denominated securities trading, foreign exchange trading and services, trade-related financial services, international factoring services, and foreign banking operations. Further, the company offers real estate trust, investment advisory, venture business investment, life and non-life insurance, trust account management, securities brokerage, and asset management services, as well as leasing and equipment financing, savings banking, loan collection and credit reporting, collective investment administration, private equity investment, and financial system development services. Additionally, it provides transaction history inquiries and fund transfers, opening letters of credit, trade finance, payment and collection management, sales and acquisition settlement, business-to-business settlement, sweeping, pooling, ERP interface, host-to-host banking, SWIFT SCORE, and cash and liquidity management service. Shinhan Financial Group Co., Ltd. was founded in 1982 and is headquartered in Seoul, South Korea.

About Bank of China

Bank of China Limited, together with its subsidiaries, provides various banking and financial services in Chinese Mainland, Hong Kong, Macao, Taiwan, and internationally. It operates through six segments: Corporate Banking, Personal Banking, Treasury Operations, Investment Banking, Insurance, and Other. The Corporate Banking segment provides current accounts, deposits, overdrafts, loans, payments and settlements, trade-related products, and other credit facilities, as well as foreign currency, derivative, and wealth management products for corporate customers, government authorities, and financial institutions. The Personal Banking segment offers savings deposits, personal loans, credit cards and debit cards, payments and settlements, wealth management, and funds and insurance agency services to retail customers. The Treasury Operations segment offers foreign exchange transactions, customer-based interest rate, and foreign exchange derivative transactions, as well as money market transactions, proprietary trading, and asset and liability management. The Investment Banking segment provides debt and equity underwriting and financial advisory, sale and trading of securities, stock brokerage, investment research, asset management services, and private equity investment services. The Insurance segment provides underwriting services for general and life insurance business, and insurance agency services. In addition, the company operates debt-to-equity swaps and other supporting, and aircraft and financial leasing business. The company was founded in 1912 and is headquartered in Beijing, China.