Canadian Imperial Bank of Commerce $63 (Toronto symbol CM Conservative Growth Portfolio, Finance sector; Shares outstanding: 380.8 million; Market cap: $24.0 billion; SI Rating: Above average) is the fifth-largest bank in Canada with assets of $343.1 billion.
The problems with U.S. subprime mortgages have hurt CIBC more than the other big five Canadian banks. So far, CIBC has written off $6 billion worth of loans and illiquid securities.
CIBC could face a further $1 billion in writedowns due to concerns over the financial health of several major bond insurers. These insurers provide CIBC and other banks with guarantees on securities they hold, such as bonds backed by U.S. subprime mortgages. In the three months ended April 30, 2008, CIBC lost $1.1 billion or $3.00 a share, mainly due to $1.7 billion (after-tax) in writedowns.
Despite the possibility of more writedowns, CIBC still has enough capital to conduct its operations and satisfy regulatory requirements.
CIBC’s recent losses have now prompted a class-action lawsuit, which accuses its officers and directors of not disclosing the full extent of the bank’s exposure to troubled securities. CIBC has denied the allegations.
The stock now trades at just 8.8 times its forecast fiscal 2008 earnings of $7.20 a share. The $3.48 dividend yields 5.5%.
CIBC is a buy.
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