Don’t Short the Canadian Banks – CIBC

Summary

  • While CM recently reported solid FY2017 results, its higher exposure to the heavily indebted Canadian consumer relative to its peers does make it more vulnerable to an economic slowdown.
  • PAA Research in the US recently released a report suggesting that CM faces headwinds which will likely result in a 30 – 40% pullback in its stock price.
  • CM’s senior management is well aware of its risks, and therefore, is in the process of diversifying its business into the US. Growth targets for its US business suggest another US acquisition will be required.
  • A retracement in stock price to the magnitude suggested by PAA is highly improbable. An investment in CM should be approached from the perspective of it being a long-term investment.

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Schedule I Canadian Banks – (part 4 of 6): Canadian Imperial Bank of Commerce Stock Analysis

Summary

  • This Canadian Imperial Bank of Commerce Stock Analysis is the fourth of a 6 part series covering the Big 6 Canadian Banks.
  • CM reported Q2 2017 results May 25th and its Liquidity Ratios continue to improve thus providing investors with assurances that it remains a safe bank.
  • Growth in its residential real estate portfolio is outpacing that of its competition as a result of major changes it has made over the past few years in the manner in which it sources business.
  • Pockets of the Canadian real estate market are wildly overheated but CM’s results indicate its real estate related loan portfolio is of sound quality.
  • While CM is an attractive long-term investment with a history of having not missed a dividend payment since its first dividend payment in 1868, other Canadian FIs are better investments.
  • I suspect we will experience a major market correction within the next 12 months and urge caution.

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