Better Buy: Bank of Montreal or Canadian Imperial Bank of Commerce?

Bank of Montreal (TSX:BMO) and Canadian Imperial Bank of Commerce (TSX:CM) offer solid value, but I’m picking one bank stock today.

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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.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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