The S&P/TSX Composite Index shed 40 points on Thursday, June 8. Some of the worst-performing sectors included health care, telecoms, and industrials. Meanwhile, the S&P/TSX Capped Financial Index fell marginally in the same trading session. Today, I want to focus on two bank stocks that look undervalued in the first half of June 2023. Let’s dive in!
This cheap Canadian bank stock also boasts a strong dividend yield
Canadian Imperial Bank of Commerce (TSX:CM) is the first cheap bank stock that I’d suggest investors snatch up before we officially move into the spring season. This Toronto-based bank is the fifth largest of the Big Six Canadian bank stocks by market cap. Shares of this bank stock have jumped 3.9% month over month as of close on June 8. That pushed the stock into positive territory in 2023 at the time of this writing.
This bank released its second-quarter (Q2) fiscal 2023 earnings on May 25. CIBC’s Canadian Personal and Business Banking segment delivered adjusted pre-provision pre-tax earnings of $1.01 billion. That was up $50 million compared to Q2 in the previous year. CIBC’s retail banking segment benefited from higher revenues and a lower provision for credit losses. Meanwhile, its Canadian Commercial Banking and Wealth Management segment reported adjusted earnings of $663 million — up $15 million compared to Q2 fiscal 2022.
United States Commercial Banking and Wealth Management is the next segment that delivered adjusted earnings of $312 million, which was up $24 million compared to Q2 2022. This segment was powered by volume growth and improved net interest margin in this interest rate-tightening environment. Finally, CIBC’s Capital Markets segment saw adjusted earnings dip 4% year over year to $497 million.
Shares of this bank stock currently possess a favourable price-to-earnings (P/E) ratio of 11. CIBC offers a quarterly dividend of $0.87 per share. That represents a tasty 6% yield.
Here’s why I’m still stacking “The International Bank” stock in the late spring season
Scotiabank (TSX:BNS) is sometimes called “The International Bank” because of its massive global footprint, particularly in Latin America. This bank stock has increased marginally month over month as of close on June 8. Meanwhile, its shares have climbed 1.7% in 2023.
In Q2 fiscal 2022, Scotiabank saw its Canadian Banking segment deliver adjusted earnings of $1.06 billion on the back of strong revenue growth and improved net interest margins. Moreover, adjusted earnings in its International Banking segment hit $673 million. This segment was negatively impacted by higher provisions for credit losses. Meanwhile, adjusted net income in its Global Wealth Management segment dropped 13% year over year to $359 million.
The bank’s final segment, Global Banking and Markets, was hit hard due to higher provisions for credit losses and an increase in non-interest expenses.