CANADIAN IMPERIAL BANK OF COMMERCE $66 - Toronto symbol CM

CANADIAN IMPERIAL BANK OF COMMERCE $66 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 384.0 million; Market cap: $25.3 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.3%; SI Rating: Above Average) is Canada’s fifth-largest bank, with assets of $335.9 billion.

The bank continues to benefit from its plan to expand its retail-banking and wealth-management operations, which are less risky than trading securities. CIBC now gets 69% of its earnings from retail banking.

In the year ended October 31, 2009, CIBC earned $1.2 billion, or $2.65 a share. If you exclude writedowns of securities, income-tax adjustments and other unusual items, the bank would have earned $5.80 a share. In the prior year, CIBC lost $2.1 billion, or $5.89 a share. However, if you exclude writedowns and the settlement of an Enron-related lawsuit, it would have earned $6.72 a share in the prior year.
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Revenue jumped 167.3%, to $9.9 billion from $3.7 billion, mainly because the bank suffered fewer losses at its securities-trading business.

Loan-loss provisions rose 113.3%, to $1.6 billion from $773 million. Most of this increase came from CIBC’s $11.3-billion credit-card loan portfolio. The bank also set aside more funds to cover potential losses on commercial real-estate and construction loans. Bad loans now stand at 0.67% of its total loans, up from 0.30% a year earlier.

CIBC will probably earn $6.10 a share this year. The stock trades at 10.8 times that figure.

CIBC is a buy.

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