Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Canadian Imperial Bank of Commerce CM reported OK results. Provisioning costs increased 6% from a quarter ago, and adjusted earnings per share of C$ 2.05 declined 7% sequentially. The trajectories of the Canadian and US economies have elevated uncertainty related to tariffs.
Why it matters: Total bank provisioning increased 6% year over year to C$ 605 million, which is better than some of CIBC’s Canadian peers. We will not read too much into this quarter’s provisioning outperformance, as most of it comes from a smaller performing loan provisioning build.
· Performing loan provisioning increased 12% from the prior quarter or 112% from last year to C$ 142 million. We note that performing loan provisioning is sensitive to changes in economic projections and other model updates.
· Impaired loan provisioning rose 4% sequentially to C$ 463 million, or 0.33% of total loans. Management maintained its 2025 guidance for impaired provisioning to be mid-30 basis points of loans.
The bottom line: We maintain our C$ 77/USD 54 fair value estimate for narrow-moat-rated Canadian Imperial Bank of Commerce after we incorporate the latest results. We view the shares as moderately overvalued.
· Valuations for the Canadian banking sector have largely recovered from April lows after some de-escalation in tariff rates. However, we still think the Canadian and US economies have elevated uncertainty, and we maintain our Medium Uncertainty Rating for CIBC.
Key stats: CIBC’s adjusted net interest income grew 16% year over year, excluding trading, driven by volume growth and net interest margin expansion of 16 basis points. While the margin expansion was impressive, the bank expects net interest margin to be stable or slightly up going forward.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
