Critical Contrast: Bank of Montreal (NYSE:BMO) & Westpac Banking (OTCMKTS:WEBNF)

Bank of Montreal (NYSE:BMO) and Westpac Banking (OTCMKTS:WEBNF) are both financial services companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, earnings, institutional ownership, risk and dividends.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Bank of Montreal	8.25%	11.60%	0.62%
Westpac Banking	N/A	N/A	N/A

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Bank of Montreal and Westpac Banking, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of Montreal	0	4	4	0	2.50
Westpac Banking	1	0	0	0	1.00

Bank of Montreal currently has a consensus target price of $127.50, indicating a potential upside of 52.99%. Given Bank of Montreal’s stronger consensus rating and higher probable upside, research analysts plainly believe Bank of Montreal is more favorable than Westpac Banking.

Dividends

Bank of Montreal pays an annual dividend of $4.53 per share and has a dividend yield of 5.4%. Westpac Banking pays an annual dividend of C$1.78 per share and has a dividend yield of 10.0%. Bank of Montreal pays out 75.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Westpac Banking pays out 74.6% of its earnings in the form of a dividend. Westpac Banking is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

45.8% of Bank of Montreal shares are owned by institutional investors. Comparatively, 13.9% of Westpac Banking shares are owned by institutional investors. 1.0% of Bank of Montreal shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Bank of Montreal and Westpac Banking’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of Montreal	$33.85 billion	1.80	$3.24 billion	$6.02	13.84
Westpac Banking	N/A	N/A	N/A	C$2.39	7.48

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

Summary

Bank of Montreal beats Westpac Banking on 11 of the 13 factors compared between the two stocks.

About Bank of Montreal

Bank of Montreal provides diversified financial services primarily in North America. It operates through Canadian P&C, U.S P&C, BMO Wealth Management, and BMO Capital Markets segments. The company’s personal banking products and services include deposits, mortgages, home lending, consumer credit, small business lending, credit cards, cash management, financial and investment advice, and other banking services; and commercial banking products and services comprise various of financing options and treasury and payment solutions, as well as risk management products. It also offers investing, banking, and wealth management advisory; digital investing services; financial solutions for individuals, families, and businesses; provides investment management services to institutional, retail, and high net worth investors; and diversified insurance, and wealth and pension de-risking solutions. In addition, the company provides individual life, critical illness and annuity products, as well as segregated funds, and group creditor and travel insurance to customers; debt and equity capital-raising, loan origination and syndication, balance sheet management, treasury management, mergers and acquisitions advice, restructurings and recapitalizations, trade finance, and risk mitigation services, as well as a range of banking and other operating services. Further, the company offers research and access to financial markets for institutional, corporate and retail clients through an integrated suite of sales and trading solutions related to debt, foreign exchange, interest rates, credit, equities, securitization, and commodities; provides new product development and origination services, as well as risk management and advisory services for hedging strategies, including in interest rates, foreign exchange rates and commodities prices; and funding and liquidity management services. The company was founded in 1817 and is headquartered in Montreal, Canada.

About Westpac Banking

Westpac Banking Corporation provides various banking and financial services in Australia, New Zealand, and internationally. The company operates through Consumer, Business, Consumer and Business Banking, Westpac Institutional Bank, Specialist Businesses, and Westpac New Zealand segments. It offers savings, term deposit, business transaction, not-for-profit transaction, foreign currency, farm management deposit, project and retention trust, and statutory trust accounts; home, personal, business, and commercial loans; car and equipment finance; business overdrafts and bank guarantees; debit and credit cards; international and travel services; share trading services; investment products; and home, car, travel, life, caravan and trailer, credit card and loan repayment, boat, and business insurance products. In addition, the company provides corporate and institutional, transaction banking, financial market, corporate and structured finance, trade and supply chain financing, and industry specific banking and treasury services, as well as online banking services. It serves individuals; small, and medium enterprises; commercial and agribusiness; and private wealth clients; and 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. Westpac Banking Corporation was founded in 1817 and is based in Sydney, Australia.