Sumitomo Mitsui Financial Group (NYSE:SMFG) and China Merchants Bank (OTCMKTS:CIHKY) Critical Survey

China Merchants Bank (OTCMKTS:CIHKY) and Sumitomo Mitsui Financial Group (NYSE:SMFG) are both large-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, valuation, profitability, risk, dividends, earnings and institutional ownership.

Analyst Recommendations

This is a summary of current ratings and target prices for China Merchants Bank and Sumitomo Mitsui Financial Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
China Merchants Bank	0	1	0	0	2.00
Sumitomo Mitsui Financial Group	0	1	1	0	2.50

Risk & Volatility

China Merchants Bank has a beta of 0.21, indicating that its stock price is 79% less volatile than the S&P 500. Comparatively, Sumitomo Mitsui Financial Group has a beta of 0.42, indicating that its stock price is 58% less volatile than the S&P 500.

Valuation & Earnings

This table compares China Merchants Bank and Sumitomo Mitsui Financial Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
China Merchants Bank	$65.04 billion	2.17	$20.89 billion	$4.03	6.95
Sumitomo Mitsui Financial Group	$71.68 billion	2.18	$10.45 billion	$1.34	18.32

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

Dividends

China Merchants Bank pays an annual dividend of $1.15 per share and has a dividend yield of 4.1%. Sumitomo Mitsui Financial Group pays an annual dividend of $0.47 per share and has a dividend yield of 1.9%. China Merchants Bank pays out 28.5% of its earnings in the form of a dividend. Sumitomo Mitsui Financial Group pays out 35.1% 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. China Merchants Bank is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares China Merchants Bank and Sumitomo Mitsui Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
China Merchants Bank	32.40%	12.14%	1.21%
Sumitomo Mitsui Financial Group	15.68%	10.19%	0.53%

Insider & Institutional Ownership

3.8% of Sumitomo Mitsui Financial Group shares are held by institutional investors. 0.1% of Sumitomo Mitsui Financial Group shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Sumitomo Mitsui Financial Group beats China Merchants Bank 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 Sumitomo Mitsui Financial Group

Sumitomo Mitsui Financial Group, Inc., together with its subsidiaries, provides banking, leasing, securities, credit card, and consumer finance services in Japan, the Americas, Europe, the Middle East, Asia, and Oceania. It operates through Wholesale Business Unit, Retail Business Unit, Global Business Unit, and Global Markets Business Unit segments. The company was incorporated in 2002 and is headquartered in Tokyo, Japan.