Written by Ambrose O'Callaghan at The Motley Fool Canada
Canadian Imperial Bank of Commerce (TSX:CM) is the fifth largest of the Big Six Canadian bank stocks. Today, I want to explore whether Canadian investors should look to snatch up one of the smallest of Canada’s elite financial institutions. Let’s jump in.
How has this bank stock performed over the past year?
Shares of CIBC have dropped 7.7% month over month as of early afternoon trading on Thursday, August 31. That has pushed this bank stock into negative territory so far in 2023. Moreover, its shares are now down 13% in the year-over-year period. Investors can see more of its recent performance with the interactive price chart below.
There has been increased anxiety surrounding the state of the domestic and global economy in recent months. Canada’s inflation rate ticked higher in the month of July, which showed that the burden being taken on by consumers is unlikely to be lifted in the near term. Ultimately, investors must brace for what will, in all likelihood, be a significant slowdown in the quarters ahead.
Should investors be happy with CIBC’s recent earnings?
This bank released its third-quarter (Q3) fiscal 2023 earnings before markets opened this morning. The bank reported revenues of $5.85 billion — up from $5.57 billion in Q3 2022. Meanwhile, adjusted net income fell 15% year over year to $1.47 billion, and adjusted diluted earnings per share (EPS) slipped 18% to $1.52.
On the business front, the bank reported net income of $497 million in its Canadian Personal and Business Banking segment. That was down 16% compared to Q3 2022. Earnings were negatively impacted by a significant increase in provisions set aside for credit losses. However, like its peers, CIBC did benefit from higher net interest income as the Bank of Canada (BoC) has pursued an aggressive rate-tightening policy over the past year.
CIBC’s Canadian Commercial Banking and Wealth Management division posted net income of $467 million, which was down 4% or $17 million compared to the prior year. The U.S. Commercial Banking and Wealth Management segment reported net income of $73 million. That was down from $120 million compared to Q3 2022.
Finally, CIBC’s Capital Markets segment achieved net income growth of 11% to $494 million in Q3 2023. The Capital Markets segment benefited from stronger revenue, but this was partially offset by higher non-interest expenses and a spike in provisions set aside for bad loans.
Why I’m buying CIBC stock for its superior yield in 2023
Shares of CIBC were down 3.5% in early afternoon trading on Thursday, August 31. Investors responded poorly to earnings that were less than inspiring. Earnings were dragged by a significant increase in provisions set aside for bad loans. Beyond that, profits also missed expectations.
Despite the less-than-inspiring quarter, I’m still looking to snatch up bank stocks on the dip. Shares of this bank stock currently possess a favourable price-to-earnings ratio of 10. Meanwhile, CIBC offers a quarterly dividend of $0.87 per share. That represents a very tasty 6.5% yield.
Before you consider CIBC, you'll want to hear this.
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