Contrasting National Bank of Canada (NTIOF) and Bank of Montreal (BMO)

National Bank of Canada (OTCMKTS: NTIOF) and Bank of Montreal (NYSE:BMO) are both large-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their risk, institutional ownership, profitability, earnings, valuation, analyst recommendations and dividends.

Profitability

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

Net Margins Return on Equity Return on Assets
National Bank of Canada 21.22% 18.35% 0.85%
Bank of Montreal 16.69% 13.85% 0.76%

Dividends

National Bank of Canada pays an annual dividend of $1.87 per share and has a dividend yield of 4.0%. Bank of Montreal pays an annual dividend of $2.93 per share and has a dividend yield of 3.9%. National Bank of Canada pays out 44.8% of its earnings in the form of a dividend. Bank of Montreal pays out 47.0% 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. National Bank of Canada is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares National Bank of Canada and Bank of Montreal’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
National Bank of Canada $6.85 billion 2.34 $1.48 billion $4.17 11.33
Bank of Montreal $21.48 billion 2.28 $4.09 billion $6.24 12.18

Bank of Montreal has higher revenue and earnings than National Bank of Canada. National Bank of Canada 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.

Risk & Volatility

National Bank of Canada has a beta of 1.36, indicating that its stock price is 36% more volatile than the S&P 500. Comparatively, Bank of Montreal has a beta of 1.07, indicating that its stock price is 7% more volatile than the S&P 500.

Institutional and Insider Ownership

0.1% of National Bank of Canada shares are owned by institutional investors. Comparatively, 44.2% of Bank of Montreal 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 stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for National Bank of Canada and Bank of Montreal, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
National Bank of Canada 0 1 1 0 2.50
Bank of Montreal 0 3 4 0 2.57

Bank of Montreal has a consensus price target of $101.50, suggesting a potential upside of 33.50%. Given Bank of Montreal’s stronger consensus rating and higher possible upside, analysts clearly believe Bank of Montreal is more favorable than National Bank of Canada.

Summary

Bank of Montreal beats National Bank of Canada on 9 of the 16 factors compared between the two stocks.

National Bank of Canada Company Profile

National Bank of Canada provides various financial products and services to retail, commercial, corporate, and institutional clients in Canada and internationally. It operates through Personal and Commercial, Wealth Management, Financial Markets, and U.S. Specialty Finance and International segments. The Personal and Commercial segment offers personal banking services, including transaction solutions, mortgage loans and home equity lines of credit, consumer loans, payment solutions, savings options, and tailored investment solutions; various insurance products; and commercial banking services, such as credit, and deposit and investment solutions, as well as international trade, foreign exchange transactions, payroll, cash management, insurance, electronic transactions, and complementary services. The Wealth Management segment provides investment solutions, trust services, banking services, lending services, and other wealth management solutions through internal and third-party distribution networks. The Financial Markets segment offers debt and equity underwriting; bank credit and risk management products and services; advisory services in the areas of mergers and acquisitions, and financing; and investment banking services comprising origination, underwriting, distribution, and liquidity services through secondary market activities, as well as macroeconomic and issuer-focused research services. The U.S. Specialty Finance and International segments provides specialty finance expertise; financial products and services to individuals and businesses in Cambodia; and the activities of targeted investments in certain emerging markets. The company provides its services through a network of 429 branches and 931 banking machines. The company was founded in 1859 and is headquartered in Montreal, Canada.

Bank of Montreal Company Profile

Bank of Montreal (the Bank) is a financial services provider. The Bank provides a range of personal and commercial banking, wealth management and investment banking products and services. The Bank conducts its business through three operating groups: Personal and Commercial Banking (P&C), Wealth Management and BMO Capital Markets. The P&C business includes two retail and business banking operating segments, such as Canadian Personal and Commercial Banking (Canadian P&C), and the United States Personal and Commercial Banking (U.S. P&C). The Bank’s Wealth Management business serves a range of client segments, from mainstream to ultra-high net worth and institutional, with an offering of wealth management products and services, including insurance. BMO Capital Markets is a North American-based financial services provider offering a range of products and services to corporate, institutional and government clients. The Bank has over 1,500 bank branches in Canada and the United States.

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