Canadian Imperial Bank of Commerce (TSX:CM) is up 30% in the past few months. Investors who missed the bounce are wondering if CM stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
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CIBC share price
CIBC trades near $101 at the time of writing compared to $78 when the tariff rout hit the market a few months ago. The stock was briefly below $70 last summer and has more than doubled since the fall of 2023.
CIBC has a large Canadian residential mortgage portfolio relative to its size when compared to its peers. As such, moves in interest rates, along with economic strength or weakness, tend to have an outsized impact on investor sentiment regarding CIBC’s prospects.
The Bank of Canada aggressively raised interest rates in 2022 and 2023 to get inflation under control. This is why the stock pulled back from $80 in early 2022 to as low as $50 in late 2023 as investors feared a wave of mortgage defaults could emerge due to higher payments on loan renewals and risks of a spike in unemployment.
The anticipated economic downturn didn’t materialize, likely due to high savings levels built up during the pandemic. Canada stopped raising interest rates in late 2023. This brought bargain hunters back into Canadian bank stocks. Cuts to interest rates in the second half of last year provided an extra tailwind.
Optimism on trade deals and continued resiliency in the Canadian and U.S. economies have helped drive CM stock to a new record high. CIBC has operations in both Canada and the United States. Adjusted net income for the fiscal second quarter (Q2) of 2025 came in at $2.016 billion compared to $1.718 billion in the same period last year. Adjusted return on equity increased to 13.9% from 13.4%. Canadian and U.S. Commercial Banking and Wealth Management operations, along with the Capital Markets group, led the gains compared to fiscal Q2 2024.
Provisions for credit losses (PCL) increased by $91 million to $605 million in the quarter. Higher interest rates are putting some businesses and households in a tough spot, but the provisions are still very small compared to the overall loan book. Investors will want to keep an eye on unemployment numbers in the next few months to get a sense of where PCL could be headed.
CIBC finished the quarter with a common equity tier-one (CET1) ratio of 13.4%. This means the bank is sitting on ample excess cash to ride out some tough times or to make a strategic acquisition.
Time to buy CIBC?
CIBC is performing well and should deliver solid long-term returns, but near-term volatility is expected with the broader market trading at high multiples and economic headwinds potentially on the way. As such, I wouldn’t back up the truck at this price. Existing holders of the stock might want to book some profits and look to add to the position again on new weakness.
