Here’s What Investors Need to Know About Canadian Imperial Bank of Commerce’s New Brand, Simplii Financial

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is going its own way with Simplii Financial. Here’s what investors need to know about the move and if it will spark long-term growth.

| More on:

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) has been one of the busiest Big Five bank stocks of late. The company has been making deals to beef up its U.S. exposure and, more recently, CIBC announced that it’s replacing President’s Choice (PC) Financial and will be cutting ties with Loblaw Companies Limited (TSX:L), the company behind the PC brand. The partnership between CIBC and Loblaw has lasted for nearly 20 years, and it remains a mystery as to why the two firms are parting ways now, as neither company has commented on the reasoning behind the split as of this writing.

Existing customers of PC Financial will be moving existing accounts over to Simplii Financial, a new online bank that will be run by CIBC. PC Financial has over two million customers, and CIBC’s management team made it clear that the transition will be without disruption, as there will be no account number changes, and the terms and conditions of mortgages will remain the same.

Existing customers will get new debit cards starting November 2017, and all PC Financial pavilions and ATMs will be shutting down by March 2018.

Transition will result in a Q4 charge of $100 million

CIBC is set to take a $100 million charge for the fourth quarter as the company invests in its new and refreshed mobile and online banking platform. Part of the cash will also be used on incentives to retain as many customers as possible.

We all know how much of a hassle it can be to get new cards and have your existing points expire. There’s a high degree of risk that many existing PC Financial customers may look elsewhere instead of being moved over to the new Simplii Financial.

Will Simplii Financial benefit CIBC over the long term?

The 20-year partnership was profitable for CIBC; however, one pundit who’s familiar with the terms of the original deal believe that “the partnership was skinny in terms of margins and returns” and that CIBC may see a “… path to greater profitability by bringing [operations] in house.”

The elimination of a partner may allow CIBC to pursue different growth opportunities in other spaces. The move appears to be a positive for long-term growth, but that’s if PC Financial customers have enough reason to stay through the transition.

Doug Young, a bank analyst at Desjardins Capital Markets, warned that any potential increases to long-term profitability “will depend on how many clients CIBC is able to hold on to.”

The management team knows that it’ll need to do everything it can to keep customers happy, otherwise CIBC may take a medium-term hit on the chin. I believe the transition will be successful, and I’m confident in the management team’s ability to drive long-term value from this move. But over the short term, this is really nothing to get too excited about.

Stay smart. Stay hungry. Stay Foolish.

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 Joey Frenette owns shares of Canadian Imperial Bank of Commerce.

More on Bank Stocks

A worker drinks out of a mug in an office.
Bank Stocks

Bank of Montreal: Buy, Hold, or Sell Now?

Bank of Montreal is up 10% in recent weeks. Are more gains on the way?

Read more »

grow money, wealth build
Bank Stocks

I’d Put $7,000 in This Canadian Bank Stock for Decades of Growth and Income

If there's one safe stock that any one can buy today with zero fear, it's this top bank stock.

Read more »

man touches brain to show a good idea
Bank Stocks

Bank of Nova Scotia: Buy, Hold, or Sell Now?

Bank of Nova Scotia picked up a new tailwind in recent weeks. Is more upside on the way?

Read more »

think thought consider
Bank Stocks

TD Bank: Buy, Sell, or Hold Today?

TD stock is up more than 20% in 2025. Is the rally just beginning?

Read more »

Piggy bank and Canadian coins
Bank Stocks

An ETF’s Payouts That Make Bank

This unique TSX bank ETF uses modest leverage to juice its yield and returns.

Read more »

Paper Canadian currency of various denominations
Bank Stocks

Where Will TD Bank Stock Be in 5 Years?

Toronto-Dominion Bank (TSX:TD) is beating the market this year.

Read more »

chart reflected in eyeglass lenses
Bank Stocks

I’d Put $7,000 in This Canadian Dividend Knight Without Hesitation

Dependable, rewarding, and built for the long term -- this top Canadian dividend stock is worth considering right now.

Read more »

woman analyze data
Bank Stocks

1 Magnificent Banking Stock up 40% to Buy and Hold Forever

Do you want a top bank stock at a steal of a deal? This dividend banker is one of the…

Read more »