Head to Head Review: Bank of America (NYSE:BAC) and Banco Santander (NYSE:SAN)

Banco Santander (NYSE:SAN) and Bank of America (NYSE:BAC) are both large-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, dividends, analyst recommendations, profitability, valuation and risk.

Risk and Volatility

Banco Santander has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500. Comparatively, Bank of America has a beta of 1.21, meaning that its share price is 21% more volatile than the S&P 500.

Profitability

This table compares Banco Santander and Bank of America’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Banco Santander	26.94%	12.43%	0.75%
Bank of America	16.80%	12.15%	0.97%

Valuation and Earnings

This table compares Banco Santander and Bank of America”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Banco Santander	$66.36 billion	2.88	$15.95 billion	$1.23	10.57
Bank of America	$191.57 billion	1.84	$30.51 billion	$4.21	11.97

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

Analyst Ratings

This is a summary of recent recommendations and price targets for Banco Santander and Bank of America, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Banco Santander	0	2	11	1	2.93
Bank of America	0	6	20	0	2.77

Banco Santander presently has a consensus price target of $15.10, suggesting a potential upside of 16.11%. Bank of America has a consensus price target of $62.52, suggesting a potential upside of 24.11%. Given Bank of America’s higher possible upside, analysts clearly believe Bank of America is more favorable than Banco Santander.

Dividends

Banco Santander pays an annual dividend of $0.21 per share and has a dividend yield of 1.6%. Bank of America pays an annual dividend of $1.28 per share and has a dividend yield of 2.5%. Banco Santander pays out 17.1% of its earnings in the form of a dividend. Bank of America pays out 30.4% 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 America has increased its dividend for 11 consecutive years. Bank of America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

9.2% of Banco Santander shares are held by institutional investors. Comparatively, 70.7% of Bank of America shares are held by institutional investors. 9.5% of Banco Santander shares are held by company insiders. Comparatively, 0.3% of Bank of America shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Bank of America beats Banco Santander on 11 of the 18 factors compared between the two stocks.

About Banco Santander

Banco Santander, S.A. provides various financial services worldwide. The company operates through Retail Banking, Santander Corporate & Investment Banking, Wealth Management & Insurance, and PagoNxt segments. It offers demand and time deposits, mutual funds, and current and savings accounts; mortgages, consumer finance, loans, and various financing solutions; and project finance, debt capital markets, global transaction banking, and corporate finance services. The company also provides asset management and private banking services; and insurance products. In addition, it offers corporate and investment banking services; and digital payment solutions. Further, it offers online banking and financial services to retail, business, institutional, corporate, private banking and university customers and clients. The company was formerly known as Banco Santander Central Hispano SA and changed its name to Banco Santander, S.A. in February 2007. Banco Santander, S.A. was founded in 1856 and is headquartered in Madrid, Spain.

About Bank of America

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, non-interest and interest-bearing checking accounts, and investment accounts and products; credit and debit cards; residential mortgages, and home equity loans; and direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The GWIM segment provides investment management, brokerage, banking, and trust and retirement products and services; wealth management solutions; and customized solutions, including specialty asset management services. The Global Banking segment offers lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, short-term investing options, and merchant services; working capital management solutions; debt and equity underwriting and distribution, and merger-related and other advisory services; and fixed-income and equity research, and certain market-based services. The Global Markets segment provides market-making, financing, securities clearing, settlement, and custody services; securities and derivative products; and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1784 and is based in Charlotte, North Carolina.