First-quarter results proved to be a good one for Canada’s Big Five banks, as all five beat earnings estimates. Standing out from the pack were Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD). Both companies earned analyst upgrades immediately following their impressive earnings results.
CIBC kicked off the bank earnings season beating earnings estimates by 12%. This prompted research company Veritas to upgrade the firm from an underperform to a buy rating. Furthermore, Canaccord Genuity, RBC Dominion Securities, and Desjardins Securities all increased their price targets on the company. CIBC’s current average analyst share price target is $132.06, which is a 13% premium over today’s price.
CIBC’s recent foray into the U.S. delivered better-than-expected results. The bank is well positioned for double-digit net interest margin growth. The company is trading at a price-to-earnings (P/E) ratio of 10.7, which is the lowest among the Big Five. CIBC raised its dividend by 2.3% and its 4.54% yield tops its peer group and is an attractive play for income investors.
On top of raising its price target for CIBC, Desjardins Securities upgraded Toronto-Dominion from a hold to a buy. Eight Capital also release a positive report, increasing its price target on the stock by 13% from $76 to $86. Toronto-Dominion’s current average analyst price target is $78.70, which is a 5% premium over today’s price.
Toronto-Dominion closed out the earnings season for Canada’s Big Five with a bang. Adjusted earnings per share jumped 15% from the previous year, and its Canadian and U.S retail operations impressed with double-digit growth. Toronto-Dominion also announced an 11.3% increase to its dividend, significantly outpacing its peers. It is currently trading at a P/E ratio of 13.5, which is tops among the Big Five, and its price to book of two is second only to Royal Bank of Canada. Despite its higher valuations, the company has typically commanded a slight premium over Canada’s biggest lenders.
Over the past number of years, there have been many naysayers who have been calling for the demise of the Big Five. These fears are due in large part to “experts” who have been predicting a housing crash similar to that experienced south of the border. More recently, the impacts of the potential changes to, or dissolving of, NAFTA has been the focus of bears’ attention. Despite these fears, Canada’s banks continue to deliver. Toronto-Dominion and Canadian Imperial Bank of Commerce are great additions to any portfolio.
