VersaBank (NASDAQ:VBNK) versus Webster Financial (NYSE:WBS) Head-To-Head Review

Webster Financial (NYSE:WBS) and VersaBank (NASDAQ:VBNK) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, risk, analyst recommendations, dividends, institutional ownership and profitability.

Risk and Volatility

Webster Financial has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500. Comparatively, VersaBank has a beta of 1.06, indicating that its stock price is 6% more volatile than the S&P 500.

Dividends

Webster Financial pays an annual dividend of $1.60 per share and has a dividend yield of 2.1%. VersaBank pays an annual dividend of $0.07 per share and has a dividend yield of 0.4%. Webster Financial pays out 26.0% of its earnings in the form of a dividend. VersaBank pays out 10.1% 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.

Analyst Ratings

This is a breakdown of recent ratings for Webster Financial and VersaBank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Webster Financial	1	11	4	0	2.19
VersaBank	0	2	1	0	2.33

Webster Financial currently has a consensus target price of $74.25, indicating a potential downside of 4.28%. VersaBank has a consensus target price of $25.00, indicating a potential upside of 31.79%. Given VersaBank’s stronger consensus rating and higher probable upside, analysts plainly believe VersaBank is more favorable than Webster Financial.

Profitability

This table compares Webster Financial and VersaBank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Webster Financial	22.78%	11.23%	1.23%
VersaBank	9.34%	8.32%	0.75%

Insider and Institutional Ownership

85.6% of Webster Financial shares are held by institutional investors. Comparatively, 56.9% of VersaBank shares are held by institutional investors. 0.5% of Webster Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Webster Financial and VersaBank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Webster Financial	$2.94 billion	4.27	$1.00 billion	$6.15	12.61
VersaBank	$217.14 million	2.82	$20.32 million	$0.69	27.49

Webster Financial has higher revenue and earnings than VersaBank. Webster Financial is trading at a lower price-to-earnings ratio than VersaBank, indicating that it is currently the more affordable of the two stocks.

Summary

Webster Financial beats VersaBank on 11 of the 16 factors compared between the two stocks.

About Webster Financial

Webster Financial Corporation operates as the bank holding company for Webster Bank, National Association that provides a range of financial products and services to individuals, families, and businesses in the United States. It operates through three segments: Commercial Banking, HSA Bank, and Consumer Banking. The Commercial Banking segment offers commercial real estate and equipment financing, business banking, asset-based lending, and commercial services; public sector finance; mortgage warehouse financing; sponsor and specialty financing services; credit, deposit, and cash flow management services; and wealth management solutions to business owners and operators, including trust, asset management, financial planning, insurance, retirement, and investment products, as well as treasury management services comprising derivative, treasury, accounts payable, accounts receivable, and trade products and services. This segment also provides commercial services, such as accounts receivable factoring and trade financing, payroll funding, and business process outsourcing. The HSA Bank segment offers health savings accounts, health reimbursement arrangements, flexible spending accounts, and commuter benefit services that are distributed directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants, and financial advisors. The Consumer Banking segment provides consumer deposit and fee-based services, residential mortgages, home equity lines, secured and unsecured loans, and credit cards to consumers; and small business banking products, such as credit, deposit, and cash flow management products to businesses and professional service firms. The company offers online and mobile banking services. Webster Financial Corporation was founded in 1935 and is headquartered in Stamford, Connecticut.

About VersaBank

VersaBank provides various banking products and services in Canada and the United States. It offers deposit products, such as web-based chequing accounts, guaranteed investment certificates, registered retirement savings plans, and tax-free savings accounts, as well as deposit insurance products. The company also provides lending services, including point of sale financing that covers purchasing loan and lease receivables from finance companies operating in various industries; commercial banking services comprising commercial real estate, public sector/infrastructure financing, and condominium financing; and residential mortgages. In addition, it offers cybersecurity services. The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016. VersaBank was incorporated in 1979 and is headquartered in London, Canada.