Another big day for Canadian bank stocks, as Canadian Imperial Bank of Commerce (CIBC) (TSE:CM) brought out its Q3 earnings. The news was more than welcome to shareholders, who sent shares surging up over 5% in Thursday morning’s trading session.
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The bank brought in C$1.93 per share in earnings, which handily beat analysts’ projections of C$1.74. It also put aside less to address credit losses than expected; analysts were looking for a loan loss provision of C$551 million. But CIBC only set aside C$489 million. That, by itself, represented the best quarter the bank had seen in a year, reports noted.
Moreover, several other critical measures surged. One of the biggest was the Personal and Business Banking segment, which is CIBC’s largest unit. That unit brought in 26% more than it did the year before, coming in at C$628 million. Interest margins also grew, as did balances on credit cards, mortgages, and personal loans, suggesting fairly brisk lending at CIBC.
Declining Real Estate Concerns
While the notion of commercial real estate challenges in the United States is still a problem, CIBC has since cut back on its exposure to that potentially very troublesome market accordingly. In fact, its portfolio—worth about $3 billion by some reports—has since reduced many of its worst potential troubles and is now significantly less exposed to commercial real estate.
There are still some issues—loans on the bank’s “watchlist” remain elevated—but the default rate is down substantially. The worst is over, according to chief risk officer Frank Guse, but there is still risk. To be fair, there is always a certain amount of risk; otherwise, there would be no chief risk officer. But, Guse also said that there could still be some risk to come.
Is Canadian Imperial Bank of Commerce a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:CM stock based on seven Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 48.32% rally in its share price over the past year, the average TSE:CM price target of C$76.89 per share implies 0.92% downside risk.
