The S&P/TSX Composite Index was up 35 points in early morning trading on Tuesday, July 4. Meanwhile, the S&P/TSX Capped Financial Index was down marginally to start the trading day. Today, I want to compare two of the top Canadian bank stocks; Bank of Montreal (TSX:BMO) and Canadian Imperial Bank of Commerce (TSX:CM). Which bank stock is the better buy in early July? Let’s jump in.
Should you buy Bank of Montreal in the early summer?
Bank of Montreal stock has climbed 3.9% month over month as of early morning trading on July 4. The bank stock is still down 3.6% so far in 2023. Investors who want to see more of its recent performance can play with the interactive price chart below.
This bank released its second-quarter fiscal 2023 earnings on May 24. In the second quarter, BMO reported adjusted net income of $2.21 billion — up from $2.18 billion in the previous year. However, adjusted earnings per share (EPS) fell to $2.93, which was down from $3.23 in the second quarter of fiscal 2022. Provisions for credit losses soared to $1.02 billion in the second quarter of 2023 — up from just $50 million in the prior year.
For the first half of fiscal 2022, BMO posted adjusted net income of $4.48 billion or $6.15 per share — down from $4.77 billion or $7.12 in the first half of fiscal 2022. Adjusted net income in BMO’s Personal and Commercial Banking segment fell 8% year over year to $864 million in the second quarter. However, adjusted net income surged 47% year over year to $866 million in its U.S. Personal and Commercial Banking segment.
Shares of this bank stock currently possess a solid price-to-earnings (P/E) ratio of 11. Meanwhile, it offers a quarterly dividend of $1.47 per share. That represents a 4.9% yield.
The case for CIBC stock in July
CIBC stock was down marginally in mid-morning trading on Tuesday, July 4. Its shares have climbed 1.7% in the year-to-date period. However, the stock is still down 10% year over year.
Investors got to see this bank’s second-quarter fiscal 2023 earnings on May 25. CIBC reported revenue growth of 6% to $5.70 billion in the second quarter of fiscal 2023. Moreover, adjusted net income dipped 2% to $1.62 billion, and adjusted diluted EPS dropped 4% to $1.70. Canadian Commercial Banking and Wealth Management posted adjusted pre-tax earnings of $663 million — up $15 million on the back of solid volume growth. Meanwhile, its U.S. Commercial Banking and Wealth Management segment delivered adjusted earnings of $312 million — up $24 million from the previous year.
In the first half of fiscal 2023, CIBC delivered total revenue of $11.6 billion — up from $10.8 billion in the first half of fiscal 2022. Meanwhile, diluted EPS dropped to $2.15 compared to $3.64 in the previous year.
This bank stock last had a favourable P/E ratio of 10. CIBC offers a quarterly dividend of $0.87 per share, which represents a tasty 6.1% yield.
The verdict
Both bank stocks are on even footing value-wise at the time of this writing. For that reason, I’m more attracted to CIBC for its superior dividend yield in early July.
