CANADIAN IMPERIAL BANK OF COMMERCE $77 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 399.8 million; Market cap: $30.8 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.0%; TSINetwork Rating: Above Average; www.cibc.com) is the fifth-largest Canadian bank, with $397.7 billion of assets.
CIBC has the highest exposure to Canada of all the big five banks: its domestic operations now supply 85% of its revenue. Its international businesses mainly consist of wealth management services in the U.S. and retail banking in the Caribbean.
In the three months ended April 30, 2013, CIBC earned $876 million, up 4.3% from $840 million a year earlier. Earnings per share rose 6.0%, to $2.12 from $2.00, on fewer shares outstanding. These figures exclude several unusual items, mainly losses on securities the bank holds.
Revenue rose 1.8%, to $3.14 billion from $3.08 billion. Revenue from its Canadian banking division (which accounts for 67% of the total) rose 1.6%, because the bank opened more branches and saw higher loan demand and fee income.
Thanks to gains on CIBC’s own investment portfolio and higher commodity-trading volumes, revenue from its trading division (19%) jumped 25.3%. An acquisition pushed up revenue at CIBC’s wealth management business (14%) by 6.0%.
More of the bank’s credit card customers are repaying their accounts on time. In response, CIBC cut its loan-loss provisions by 14.0%, to $265 million from $308 million a year earlier. The bank also lowered its provisions due to fewer loan losses at its Caribbean banking and U.S. real estate lending operations.
Due to its improving outlook, CIBC increased its quarterly dividend by 2.1%, to $0.96 a share from $0.94. The new annual rate of $3.84 yields 5.0%. The stock trades at just 9.0 times the bank’s likely 2013 earnings of $8.51 a share.
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