HSBC Holdings plc (HBC): Can It Outperform JPMorgan Chase & Co. (JPM) Chase?

Although both banks could afford the losses, they did make a dent in last year’s profits, contributing to a 20% drop in earnings per share for HSBC, and reducing JPMorgan’s otherwise impressive earnings growth.

Should you buy HSBC or JPMorgan?
As a U.K. investor with a focus on dividend income, my choice would be HSBC — and although its shares look quite fully valued at present, the bank’s 4.7% forecast dividend yield is much more attractive than JPMorgan’s 2.9% forecast yield, and in my view is enough to justify HSBC’s current share price.

If I was looking for a value investment, I would choose JPMorgan. The American bank’s current share price gives it a price to book ratio (P/B) of less than one and a trailing P/E ratio of just 9, well below the U.S. and U.K. market averages, providing the potential for a rerating as investors regain confidence in the bank and its CEO, Jamie Dimon.

2013’s top income stock?
Although both HSBC and JPMorgan are attractive income shares, the U.K. utility sector remains one of the best places to find reliable, high-yielding income stocks. But not all utilities are equal and some are facing serious challenges that could lead to dividend cuts.

The article Can HSBC Holdings Outperform JPMorgan Chase? originally appeared on Fool.com and is written by Roland Head.

Roland owns shares in HSBC Holdings but does not own shares in JPMorgan Chase. The Motley Fool owns shares of JPMorgan Chase.

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