Westpac Banking (NYSE:WBK) and Royal Bank of Canada (NYSE:RY) are both large-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, valuation, earnings, risk and dividends.

Dividends

Westpac Banking pays an annual dividend of $1.34 per share and has a dividend yield of 7.3%. Royal Bank of Canada pays an annual dividend of $3.04 per share and has a dividend yield of 4.3%. Westpac Banking pays out 77.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Royal Bank of Canada pays out 46.6% of its earnings in the form of a dividend.

Risk and Volatility

Westpac Banking has a beta of 1.24, indicating that its share price is 24% more volatile than the S&P 500. Comparatively, Royal Bank of Canada has a beta of 1.15, indicating that its share price is 15% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for Westpac Banking and Royal Bank of Canada, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Westpac Banking 3 2 2 0 1.86
Royal Bank of Canada 1 4 5 0 2.40

Royal Bank of Canada has a consensus price target of $102.00, indicating a potential upside of 43.64%. Given Royal Bank of Canada’s stronger consensus rating and higher possible upside, analysts clearly believe Royal Bank of Canada is more favorable than Westpac Banking.

Earnings and Valuation

This table compares Westpac Banking and Royal Bank of Canada’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Westpac Banking $28.76 billion 2.18 $6.16 billion $1.74 10.58
Royal Bank of Canada $43.93 billion 2.33 $9.64 billion $6.53 10.87

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

Institutional & Insider Ownership

0.5% of Westpac Banking shares are owned by institutional investors. Comparatively, 41.2% of Royal Bank of Canada shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Westpac Banking and Royal Bank of Canada’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Westpac Banking N/A N/A N/A
Royal Bank of Canada 21.60% 18.09% 0.98%

Summary

Royal Bank of Canada beats Westpac Banking on 13 of the 15 factors compared between the two stocks.

About Westpac Banking

Westpac Banking Corporation provides various banking and financial services in Australia, New Zealand, Asia, the Pacific region, and internationally. It operates through five divisions: Consumer Bank, Business Bank, BT Financial Group, Westpac Institutional Bank, and Westpac New Zealand. It offers everyday banking, savings, term deposit, moving to Australia, under 21 and student, business one, community solutions one, not-for-profit savings, and foreign currency accounts; term and farm management deposits; debit, credit, and travel money cards; home, personal, investment, small business, and commercial loans; and equipment, automotive, cash flow, property, insurance premium, corporate and structured finance, and trade and supply chain financing services. It also provides home and content, landlord, car, travel, boat, caravan and trailer, life, credit card and loan repayment, income protection, business, farm pack, person income, and business overheads insurance products; superannuation and retirement products; investment portfolios; instalment warrants; and trading, financial advisory, wealth, foreign currency exchange, international payment, cash flow management, international trade, and import and export services. In addition, it offers industry specific banking and treasury services; other services, such as emergency cash, online and telephone banking, ATMs, unclaimed money, travel center, margin lending, and banking services to migrants moving to Australia; and mobile wallets. Further, it provides capital advisory and fund management, transactional and private banking, and financial market services. It serves individuals; micro, small, and medium enterprises; and commercial, corporate, institutional, and government customers. The company was formerly known as Bank of New South Wales and changed its name to Westpac Banking Corporation in October 1982. The company was founded in 1817 and is headquartered in Sydney, Australia.

About Royal Bank of Canada

Royal Bank of Canada operates as a diversified financial service company worldwide. The company's Personal & Commercial Banking segment offers check and savings accounts; home equity and auto financing, personal lending, private banking, mutual fund, self-directed brokerage account, and guaranteed investment certificate services; and credit cards, and payment products and solutions for individuals. It also provides lending, leasing, deposit, investment, foreign exchange, cash management, auto dealer financing, and trade products and services to small and medium-sized commercial businesses. In addition, this segment offers international financing and trade promotion services through branches, automated teller machines, and online and mobile banking. The company's Wealth Management provides investment, trust, banking, credit, and other wealth management solutions to high and ultra-high net worth clients; and asset management products to institutional and individual clients through its distribution channels and third-party distributors. Its Insurance segment offers life, health, home, auto, travel, wealth, annuities, and reinsurance advice and solutions; and creditor and business insurance services to individual, business, and group clients through its field sales force, advice centers, and online, as well as through independent insurance advisors and affinity relationships. The company's Investor & Treasury Services segment provides asset, cash management, transaction banking, and treasury services to institutional clients; correspondent banking and trade finance services for financial institutions; and short-term funding and liquidity management services. Its Capital Markets segment offers corporate and investment banking, as well as equity and debt origination, distribution, sale, and trading services for corporations, institutional investors, asset managers, governments, and central banks. The company was founded in 1864 and is headquartered in Toronto, Canada.

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