Canadian Imperial Bank of Commerce (CM.TO)

Had a big drop today but wouldn’t take that to heart. Felt the numbers were quite reasonable. They haven’t really had a misstep for a couple of years. Don’t let the short term swings bother you too much.

Canadian Banks look attractive. The criticism is that housing and energy sectors are weighing on them with some potential credit losses. He doesn’t think these impacts the dividends. Good dividends with reasonable earnings multiples, and there is some upside if the oil/gas environment does improve. He is waiting to see what they do in terms of acquisitions. Dividend yield of 4.5%.

They recently reiterated that they are taking some cost cutting measures. They are executing well and reaffirmed their guidance. They are making a lot of money through service charges.

The laggard of the group although it has been catching up lately. Surprised the street on the upside with the Q3 earnings. They have the best equity capital in the business under Basel III rules. Accelerating dividend growth to the extent that they will be in the upper end of their 40%-50% payout ratio. Thinks you can get healthy double-digit returns on the stock. The multiple has been depressed, but is starting to come back. Dividend yield of 4.81%.

He does not know if there will be a stock split but it shouldn’t matter. It is one of the world’s soundest banks, but limited to Canada so not great growth prospects.

They went a bit of a different route in that they are increasing their payout ratio. They are a pretty domestic bank. 4.8% dividend. When global investors come back it can really prop up the shares.

CIBC hasn't had any bad news stories lately. The risk management has improved. All the Canadian banks are very inexpensive right now. He thinks that the Canadian banks trading at 11X earnings or sometimes cheaper are a tremendous buy right now. He doesn't see interest rates rising soon. The banks can still make money through their investment banking business, proprietary bond trading business and fee taking business. They have tremendous pricing power, they are price makers. If you can buy a price maker with that kind of low PE “You got to do it”.

For many years this has been the unfavoured bank amongst Canadian banks. It has the highest yield and they have raised the dividend a couple of times to the shock of some people. Good yield and they are growing the dividend. Has the best tier 1 capital ratio in Canada. Sentiment is starting to swing back to this bank. This is a bit of a contrarian play. Dividend yield of 4.67%.

The banks are a homogenious group, and are all good investments. Recommends holding 2 or 3 of them. It is a play on the Canadian market and economy. Recommends buying the bank stock where you do your own banking, so you will be less annoyed by the fees.

They have turned a corner in terms of management. It has been de-risked. This has the juiciest yield. They have to compensate investors because the growth is not there because of them having no international exposure. It is a good place to be as we go forward.

This is one of the banks he would be buying. Their EPS growth was up 5% year-over-year. They are benefiting from really strong market sensitive fees. Doing a good job containing costs. Trading at a discount to its peers.

CIBC (CM-T) or TD (TD-T)? What is amazing is that both of these banks are trading at the same valuation. Both of them are just over his green line. This has a 32% upside while TD has a 16%. You have to watch Canadian bank stocks very carefully as the world is Shorting Canada. Canada has all the wrong things going for it including current account deficits, a commodity-based economy, highest personal debt globally, a real estate bubble, etc. If either of these had a significant break, he would be out of there.

Any of the Canadian banks, over the last 52 weeks, haven’t done a whole lot. He is underweight them. Loan growth is going to be challenged with the Canadian consumer being so heavily indebted. This is the Canadian bank that is most heavily focused in Canada. They rely very much on what the Canadian consumer does, which he feels is going to be sluggish in the upcoming year. You might be better off on owning a basket of Canadian banks rather than focusing on one only.

“Say on pay” was rejected at the annual meeting. Would this have made a big deal of difference to the value of a company stock? The whole “Say on pay” is a pretty complicated issue. Institutional shareholders want to see more long-term incentives to be met with longer-term rewards. This bank caught everybody off guard with the extra pay packages for the leaving executives. Investors are not well served by those kinds of surprises and it does have some effect.

Prefers Toronto Dominion (TD-T), Royal (RY-T) and Bank of Montréal (BMO-T). Yields are lower, but CIBC put its foot in it rather badly when they tried to give 2 retiring executives pay stubs of $25 million between them. (The board stopped that.) They keep on stumbling. (See Top Picks.)