M&T Bank (NYSE:MTB) and Bank of Nova Scotia (NYSE:BNS) are both large-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, institutional ownership, risk, valuation, analyst recommendations, dividends and earnings.

Institutional and Insider Ownership

82.1% of M&T Bank shares are held by institutional investors. Comparatively, 45.7% of Bank of Nova Scotia shares are held by institutional investors. 0.5% of M&T Bank 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 M&T Bank and Bank of Nova Scotia’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
M&T Bank 29.81% 14.26% 1.71%
Bank of Nova Scotia 18.32% 13.53% 0.85%

Valuation and Earnings

This table compares M&T Bank and Bank of Nova Scotia’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
M&T Bank $6.45 billion 3.25 $1.92 billion $12.86 12.19
Bank of Nova Scotia $31.11 billion 2.20 $6.64 billion $5.44 10.33

Bank of Nova Scotia has higher revenue and earnings than M&T Bank. Bank of Nova Scotia is trading at a lower price-to-earnings ratio than M&T Bank, indicating that it is currently the more affordable of the two stocks.

Dividends

M&T Bank pays an annual dividend of $4.00 per share and has a dividend yield of 2.6%. Bank of Nova Scotia pays an annual dividend of $2.66 per share and has a dividend yield of 4.7%. M&T Bank pays out 31.1% of its earnings in the form of a dividend. Bank of Nova Scotia pays out 48.9% 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. M&T Bank has increased its dividend for 2 consecutive years and Bank of Nova Scotia has increased its dividend for 2 consecutive years.

Volatility and Risk

M&T Bank has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500. Comparatively, Bank of Nova Scotia has a beta of 1.18, suggesting that its stock price is 18% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for M&T Bank and Bank of Nova Scotia, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
M&T Bank 2 7 5 0 2.21
Bank of Nova Scotia 0 6 2 0 2.25

M&T Bank currently has a consensus price target of $176.58, suggesting a potential upside of 12.62%. Bank of Nova Scotia has a consensus price target of $80.00, suggesting a potential upside of 42.35%. Given Bank of Nova Scotia’s stronger consensus rating and higher possible upside, analysts clearly believe Bank of Nova Scotia is more favorable than M&T Bank.

Summary

M&T Bank beats Bank of Nova Scotia on 10 of the 16 factors compared between the two stocks.

M&T Bank Company Profile

M&T Bank Corporation operates as the holding company for Manufacturers and Traders Trust Company; and Wilmington Trust, National Association that provide banking services. The company's Business Banking segment offers deposits, business loans and leases, and credit cards; and cash management, payroll, and letters of credit services to small businesses and professionals. Its Commercial Banking segment provides credit and banking services for middle-market and large commercial customers. The company's Commercial Real Estate segment offers multifamily residential and commercial real estate credit, and deposit services. Its Discretionary Portfolio segment provides deposits; securities, residential real estate loans, and other assets; and short and long term borrowed funds, as well as foreign exchange services. The company's Residential Mortgage Banking segment offers residential real estate loans for consumers and sells those loans in the secondary market; and purchases servicing rights to loans originated by other entities. Its Retail Banking segment offers demand, savings, and time accounts; consumer installment loans, automobile and recreational finance loans, home equity loans and lines of credit, and credit cards; demand, savings; and time accounts; mutual funds and annuities; and other services. The company also provides trust and wealth management; fiduciary and custodial; investment management; and insurance agency services. It offers its services through banking offices, business banking centers, telephone and Internet banking, mobile banking, and automated teller machines. As of December 31, 2018, the company had 750 domestic banking offices in New York State, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, and the District of Columbia; a full-service commercial banking office in Ontario, and Canada; and an office in George Town, Cayman Islands. M&T Bank Corporation was founded in 1856 and is headquartered in Buffalo, New York.

Bank of Nova Scotia Company Profile

The Bank of Nova Scotia provides various banking products and services in North America, Latin America, the Caribbean and Central America, and the Asia-Pacific. The company offers financial advice and solutions, and day-to-day banking products, including debit and credit cards, chequing and saving accounts, investments, mortgages, loans, and related creditor insurance to individuals and small businesses; and commercial banking solutions comprising lending, deposit, cash management, and trade finance solutions to medium and large businesses, including automotive dealers and their customers. It is also involved in the provision of investment and wealth management advice, services, products, and solutions to customers and advisors; wealth management solutions, such as private customer, online brokerage, full-service brokerage, pension, and institutional customer services, as well as asset management business focusing on developing investment solutions for retail and institutional investors; and international banking services for retail, corporate, and commercial customers. In addition, the company offers corporate lending; trade finance and cash management; investment banking services, including corporate finance, and mergers and acquisitions; fixed income and equity underwriting, sales, trading, and research services; prime brokerage and stock lending services; foreign exchange sales and trading services; commodity derivatives sales and trading; and collateral management services for corporate, government, and institutional investor clients. Further, it provides Internet, mobile, and telephone banking services. The company operates a network of 955 branches and approximately 3,644 automated banking machines in Canada; and approximately 1,800 branches internationally, as well as contact and business support centers. The Bank of Nova Scotia was founded in 1832 and is headquartered in Toronto, Canada.

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