There are concerns about the bank stock sector all over, and Canada’s banks are no exception. News that Canadian Bank of Commerce (TSE:CM) (NYSE:CM) isn’t in all that bad of shape was taken with a grain of salt by investors, who sent shares down modestly in Monday afternoon’s trading.
Concerns about the nature of Canadian banking stocks abounded, starting with underpowered growth in lending and carrying on to concerns about the solidity of currently issued loans. Those two points, coupled with an overall macroeconomic environment that looks increasingly sour, left bank stocks on the back foot.
However, there are signs that some of the biggest problems were, perhaps, a bit overblown. Meny Grauman, a Scotiabank analyst, pointed out that analysts are getting “…much more constructive…” when it comes to the overall outlook. However, it would still take time, as Grauman expects something like a recovery to be clear “…in fiscal 2025.”
A Grab Bag of Signals
Meanwhile, the signals look like a third base coach simultaneously signaling the runner on second to steal home and change jobs altogether. For instance, a major positive for Canadian banks is their comparatively limited exposure to commercial real estate, which is a major problem for some banking sectors. However, those same banks are at ground zero for upcoming earnings reports, which will tell the story about how well things are going overall.
In fact, Canadian Bank of Commerce, the fifth largest lender in Canada, also has the largest exposure to commercial real estate at roughly 11% of its loan portfolio. Meanwhile, concerns about overall real estate lending—including residential—are starting to crop up as the inflation-battered consumer finds paying back a home loan increasingly difficult.
Is Canadian Bank of Commerce a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CM stock based on four Buys and four Holds assigned in the past three months, as indicated by the graphic below. After a 6.13% rally in its share price over the past year, the average CM price target of C$67.18 per share implies 7.09% upside potential.
