3 Major Takeaways From CIBC’s Latest Results

Was CIBC able to keep the banks’ winning streak alive?

| More on:
The Motley Fool

After the first four of Canada’s big five banks reported better-than-expected numbers for the most recent quarter, it was only fitting that Canadian Imperial Bank of Commerce (TSX: CM)(NYSE: CM) do the same. And on Thursday morning, that’s exactly what the bank did, with adjusted earnings per share of $2.17, beating analysts’ estimates of $2.06.

One thing that did distinguish CIBC from its peers was the presence of one-time items in its results. When these are not included, the bank made only $0.73 per share. But there is no mistaking the fact that CIBC has kept the Canadian banks’ winning streak alive.

Below are the three biggest takeaways from the quarter.

1. Caribbean writedown

The biggest of these one-time items was a writedown of $543 million in the bank’s Caribbean division. This was comprised of a $420 million goodwill impairment charge and loan losses of $123 million. CIBC is not the only one to have difficulty in the Caribbean — Royal Bank of Canada (TSX: RY)(NYSE: RY) has been struggling in the region as well.

The problem is that tourism levels in the region have not recovered as quickly as most people thought they would after the economic crisis. As a result, too many loans to fund new resorts and business expansions have gone sour.

2. The transition to Aventura

Adjusted net income in the retail and business banking segment fell 2% from the second quarter a year ago, the big event of course being the loss of half the Aeroplan credit card portfolio, which now resides at Toronto-Dominion Bank (TSX: TD)(NYSE: TD).

CIBC is doing its best to make up for that lost credit card business with its Aventura credit cards, and seems to be doing well — the company claims that sales of the new card have already exceeded expectations for the entire year. But as every bank executive knows, it can be very difficult to get people to switch credit cards. Investors will have to be patient.

Excluding the impact of the credit card acquisition, CIBC enjoyed a great quarter in this segment, with income increasing 8%.

3. Use of capital

Again like the other banks, CIBC’s strong earnings leave it with plenty of capital to work with. By the end of Q2, the bank’s Common Equity Tier 1 Ratio stood at 10%. In response, the bank announced a quarterly dividend increase of $0.02 to $1.00 per share. Based on that new payout, the shares yield approximately 4.1%.

And that is something that CIBC’s investors can count on. No matter what problems there are in the Caribbean, or how many credit card accounts must be replaced, the core operations of CIBC are strong enough to maintain a healthy dividend. The bank remains a compelling option for investors looking for some steady income.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article.

More on Investing

nugget gold
Metals and Mining Stocks

Should You Buy New Gold Stock While It’s Below $8?

New Gold is a TSX mining stock that has more than doubled in the last 12 months. Is NGD stock…

Read more »

Nuclear power station cooling tower
Energy Stocks

1 Magnificent Canadian Stock Down 13% to Buy and Hold Forever

Canadian stocks can be tough when it comes to choosing the right option, but this one is a no brainer.

Read more »

A meter measures energy use.
Dividend Stocks

Best Stock to Buy Right Now: Fortis vs Emera?

These utility stocks are on a roll. Is one still cheap?

Read more »

money cash dividends
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Investing in fundamentally strong TSX dividend stocks can help you outpace the broader markets over time.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, June 12

Cooling inflation data out of the U.S. propelled the TSX to a record close and boosted hopes for sooner-than-expected Fed…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

Transform Your Retirement With This 4.7%-Yielding Dividend Knight

Retirement is supposed to be the best time, but can often be the scariest – except when you have this…

Read more »

Metals
Metals and Mining Stocks

Should You Buy First Majestic Silver Stock While It’s Below $12?

First Majestic Silver is a TSX mining stock positioned to deliver outsized gains to shareholders over the next 18 months.

Read more »

Aerial view of a wind farm
Energy Stocks

5.8% Dividend Yield! I’m Buying This Dividend Stock and Holding for Decades

There are energy stocks, and then there's this undervalued dividend stock for long-term income.

Read more »