CANADIAN IMPERIAL BANK OF COMMERCE $75 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 402.7 million; Market cap: $30.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.cibc.com) is Canada’s fifth-largest bank, with total assets of $391.4 billion.
CIBC plans to sell FirstLine, which provides mortgages through third-party brokers, and instead build up its in-house mortgage business.
The bank should earn higher profits from its mortgages as a result. It will also be able to promote credit cards and other products to its mortgage clients. CIBC aims to complete the sale over the next few months.
Meanwhile, the bank’s earnings fell 1.4%, in the three months ended January 31, 2012, to $792 million from $803 million a year earlier. Earnings per share fell 3.4%, to $1.97 from $2.04, on more shares outstanding. These figures exclude several unusual items, mainly gains and losses on sales of securities. Revenue rose 2.0%, to $3.2 billion from $3.1 billion.
Low interest rates continue to fuel strong loan demand at CIBC’s main retail banking operations. Retail banking now accounts for 78% of CIBC’s business, up from 75% a year earlier.
However, loan-loss provisions rose 19.4% in the quarter, to $338 million from $283 million a year earlier. That’s mainly due to higher losses on its U.S. real estate and Caribbean loan portfolios. CIBC is also seeing higher loan losses from credit cards.
CIBC’s shares trade at just 9.6 times the $7.82 a share that the bank will likely earn in 2012. The $3.60 dividend yields 4.8%.
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