CANADIAN IMPERIAL BANK OF COMMERCE $104 (Toronto symbol CM; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 397.0 million; Market cap: $41.3 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.cibc.com) is Canada’s fifth-largest bank, with $405.4 billion of assets.
CIBC prefers to focus on domestic banking instead of international expansion; Canada supplies about 85% of its revenue. The bank sold half of its Aeroplan accounts to TD Bank (see page 113) when TD took over the plan.
As a result, its earnings fell 2.5% in the three months ended July 31, 2014, to $908 million from $931 million a year earlier. Per-share earnings declined 1.3%, to $2.23 from $2.26, on fewer shares outstanding. These figures exclude unusual items, such as gains on investment sales.
Even with the loss of the Aeroplan accounts, The bank’s overall revenue rose 3.4%, to $3.4 billion from $3.25 billion. Strong gains at CIBC’s Canadian banking, wealth management and securities trading operations were behind the improvement. The bank likely earned $8.94 a share in fiscal 2014, up just 1.8% from $8.78 in 2013. The stock trades at 11.6 times that estimate.
However, CIBC plans to buy back up to 2% of its common shares over the next year, which should increase its per-share earnings in 2015. The $4.00 dividend yields 3.8%.
CIBC is a buy.
