Critical Review: Bank of Montreal (NYSE:BMO) vs. Sumitomo Mitsui Financial Grp (NYSE:SMFG)

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

Insider & Institutional Ownership

41.3% of Bank of Montreal shares are held by institutional investors. Comparatively, 2.8% of Sumitomo Mitsui Financial Grp shares are held by institutional investors. 1.0% of Bank of Montreal shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.



Profitability

This table compares Bank of Montreal and Sumitomo Mitsui Financial Grp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bank of Montreal 17.27% 14.54% 0.78%
Sumitomo Mitsui Financial Grp 12.67% 6.23% 0.36%

Dividends

Bank of Montreal pays an annual dividend of $3.12 per share and has a dividend yield of 4.5%. Sumitomo Mitsui Financial Grp pays an annual dividend of $0.28 per share and has a dividend yield of 4.4%. Bank of Montreal pays out 44.6% of its earnings in the form of a dividend. Sumitomo Mitsui Financial Grp pays out 29.2% 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. Bank of Montreal has increased its dividend for 2 consecutive years. Bank of Montreal is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings for Bank of Montreal and Sumitomo Mitsui Financial Grp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bank of Montreal 1 8 1 0 2.00
Sumitomo Mitsui Financial Grp 0 1 0 0 2.00

Bank of Montreal presently has a consensus price target of $109.00, suggesting a potential upside of 57.42%. Given Bank of Montreal’s higher probable upside, equities research analysts clearly believe Bank of Montreal is more favorable than Sumitomo Mitsui Financial Grp.

Risk and Volatility

Bank of Montreal has a beta of 1.16, indicating that its share price is 16% more volatile than the S&P 500. Comparatively, Sumitomo Mitsui Financial Grp has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500.

Earnings & Valuation

This table compares Bank of Montreal and Sumitomo Mitsui Financial Grp’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Bank of Montreal $25.01 billion 1.77 $4.24 billion $6.99 9.91
Sumitomo Mitsui Financial Grp $51.74 billion 0.87 $4.98 billion $0.96 6.63

Sumitomo Mitsui Financial Grp has higher revenue and earnings than Bank of Montreal. Sumitomo Mitsui Financial Grp 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 Sumitomo Mitsui Financial Grp on 12 of the 16 factors compared between the two stocks.

About Bank of Montreal

Bank of Montreal provides diversified financial services primarily in North America. It operates through three groups: Personal and Commercial Banking, Wealth Management, and BMO Capital Markets. The company's personal banking products and services include checking and savings accounts, credit cards, mortgages, and financial and investment advice services; and commercial banking products and services comprise business deposit accounts, commercial credit cards, business loans and commercial mortgages, cash management solutions, foreign exchange, and specialized banking programs for small business and commercial banking customers, as well as wealth management products and services, such as insurance products. It also offers equity and debt underwriting, corporate lending and project financing, mergers and acquisitions advisory services, securitization, treasury management, risk management, equity and fixed income research, and institutional sales and trading services to corporate, institutional, and government clients. In addition, the company offers trade finance, investment management, online investing, trust and estate services, tax planning, and investment solutions to institutional investors, as well as industry-leading research, sales, and trading services. It operates approximately 1,500 branches in Canada and the United States, as well as offices in 27 jurisdictions. The company was founded in 1817 and is headquartered in Montreal, Canada.

About Sumitomo Mitsui Financial Grp

Sumitomo Mitsui Financial Group, Inc., together with its subsidiaries, provides commercial banking, leasing, securities, consumer finance, and other services primarily in Japan. It operates through four segments: Wholesale Business, Retail Business, International Business, and Global Markets Business. The Wholesale Business segment provides financing, investment management, risk hedging and settlement services, as well as financial solutions for mergers and acquisition and other advisory services and leasing, primarily for large-and mid-sized corporate clients; and various leasing services, including equipment, and operating and leveraged leasing. The Retail Business segment offers wealth management, settlement services, consumer finance, and housing loans. The International Business segment provides loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives, and global cash management services; underwriting services; and leasing services related to the construction machinery, transportation equipment, industrial machinery, medical equipment, and aircraft leasing. As of March 31, 2018, this segment's network consisted of 18 branches, 22 sub-branches, and 4 representative offices. The Global Markets Business segment offers foreign exchange products, derivatives, bonds, stocks and other marketable financial products, and undertakes asset liability management operations. It also offers system development, data processing, management consulting, and economic research services; and investment advisory and investment trust management services. The company was founded in 2002 and is headquartered in Tokyo, Japan.

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