On average, Canada’s Big Five banks are down about 8% in the past three months. That’s partly due to concerns over a sharp increase in real estate prices, especially in Toronto and Vancouver. Any significant rise in interest rates would hurt the ability of some borrowers to repay their mortgages. It could also slow new mortgage business for lenders.

However, all of the Big Five are well-diversified, and that helps shield them from problems in any one region or line of business. CIBC has taken a big step in that direction with its acquisition of Chicago’s PrivateBancorp.

CANADIAN IMPERIAL BANK OF COMMERCE (Toronto symbol CM; www.cibc.com) is Canada’s fifth-largest bank. The extension of its corporate banking operations in the U.S. in the 1990s and early 2000s led to several significant losses. In 2005, the bank decided to exit the U.S. and instead focus on improving the profitability of its Canadian banking operations.

Now it is re-entering the U.S. CIBC completed its acquisition of Chicago-based PrivateBancorp Inc. (Nasdaq symbol PVTB) on June 23, 2017.

That firm mainly lends to small and midsized businesses. It also provides wealth management services. Under the terms of the deal, CIBC will pay $4.9 billion U.S. (45% in cash and 55% in stock).

Big acquisitions like this add risk. However, the new operations should begin to lift the bank’s overall earnings in the third year following the acquisition. The purchase of PrivateBancorp also helps to cut CIBC’s high exposure to Canada, which now supplies 85% of its revenue. Moreover, the bank plans to cross-sell other services to PrivateBancorp’s high-quality clientele.

Blue Chip Stocks: Bank trades at low multiple to projected 2017 earnings

Meantime, CIBC continues to close branches and expand its online operations. Excluding unusual items, the bank’s earnings in the quarter ended April 30, 2017, rose 11.4%, to $1.1 billion from $947 million a year earlier. Per-share profits gained 10.0%, to $2.64 from $2.40, on more shares outstanding.

Earnings at CIBC’s retail banking operations (59% of the total) fell 0.8% due to new investments in the online platform. Earnings from securities trading (27%) jumped 36.3%. That’s because the year-earlier quarter included extra provisions for the bank’s loans to oil and gas producers. CIBC’s wealth management business (14%) reported a 15.9% increase in its earnings as rising stock markets increased the value of the assets it manages.

Overall revenue in the quarter increased 1.8%, to $3.7 billion from $3.6 billion. The bank’s loan-loss provisions dropped 44.8%, to $179 million from $324 million a year earlier.

CIBC trades at 9.7 times the $10.77 a share that the bank should earn in fiscal 2017. The $5.08 dividend yields 4.8%.

Recommendation in The Successful Investor: BUY

For our advice on making the most of blue chips, read Blue chip stock investing: 5 pointers for success.

For our recent report on another of Canada’s blue chip banks, read Rising earnings pave the way for big bank’s dividend increase.