It was a big week for the Big Six Banks. We started to see earnings come out, and while some were…alright, others were decidedly not. So even though inflation and interest rates look to be coming down, bank stocks still have a ways to go.
Yet perhaps none more so than Toronto Dominion Bank (TSX:TD) and Canadian Imperial Bank of Commerce (TSX:CM). These two bank stocks both had earnings come in, with investors reacting accordingly. However, after looking over their respective performance and seeing analysts weigh in, let’s see which could be a better buy today.
CIBC stock is the first of the banks to see relatively positive earnings results. The company managed to deliver a solid financial performance, with an increase in profits as well. The bank beat out profit expectations and set aside a smaller-than-expected loan provision as it continued to cut costs. In fact, costs came down through a 5% reduction in its workforce, about 2,400 positions.
The fifth-biggest bank also reported adjusted earnings at $1.57 per share. This was an improvement from the $1.53 per share the year before.
“We enter the new fiscal year with a robust balance sheet and strong credit quality, foundational to our progress as we enable and simplify our bank, focus on driving growth in the mass affluent and private wealth segments, build on our strength in digital, and leverage our connected culture to grow our commercial and capital markets business. “Victor Dodig, CIBC President and Chief Executive Officer
CIBC stock also increased the dividend to $0.90 quarterly, up from $0.87 starting January 31, 2024. So there is clearly some positivity going into next year.
TD stock did not have as much positivity for investors. The bank stated it was cutting 3% of its staff, setting aside more money for loans, and continuing to navigate what was described as a “challenging environment.”
The company would contribute the $363 million from employee salaries to restructuring charges in the quarter, along with the first half of next year. That restructuring will look to save $400 million before tax for 2024’s fiscal year, and $600 million thereafter, according to TD.
Earnings came under pressure from this, coming to $2.9 billion, or $1.49 per diluted share for the quarter. This was down from a profit of $6.7 billion, or $3.62 per diluted share in 2022. The bank continued to put aside a lot of cash for bad loans, setting aside $878 million, almost four times the $261 million from last year, and higher than estimates.
Even so, TD stock managed to also increase dividends to $1.02 quarterly, up from $0.96. All while its personal and commercial banking, retail business, and wealth management and insurance business saw a drop.
Analysts weigh in
The fourth quarter results, of course, brought in analyst responses as well. CIBC stock saw strong results, though its reserves were less than expected. Further, revenue could be slower as the stock moves forward. CIBC stock is now expected to continue performing relatively similar to the rest of the sector, but could still see a larger jump in share price. The potential upside could reach a high of 18% as of writing.
As for TD stock, analysts were even less positive. Expense growth should be incredibly high compared to peers, analysts stated. This comes down to its investments in risk and control systems, including an investigation into the bank’s anti-money-laundering controls. Furthermore, its United States contributions also added to the weak quarter. This caused analysts to trim expectations for the stock.
So which is the better buy? CIBC certainly looks like it’s improving at a rapid rate. Now, of course, Canadian banks in general will likely continue to do well for long-term holders. But, as mentioned, the road to recovery looks steeper for TD stock. So if I’m getting any, it’s going to be CIBC stock today.