Canadian Imperial Bank of Commerce Earnings: Better Provisioning and Strong Trading Results

Narrow-moat-rated Canadian Imperial Bank of Commerce, or CIBC, reported decent fiscal third-quarter earnings that were largely in line with our expectations, with strong trading results helping total revenue. Adjusted net income increased by 28% from a year ago to CAD 1.9 billion. Adjusted earnings per share were CAD 1.93, representing an increase of 27% year over year and 10% quarter over quarter. The results translate into an adjusted ROE of 14%, still below the bank’s medium-term target of 16%. We note that the third quarter of last year was hit by oversized provisioning, making for an easier year-over-year comparison. Given that third-quarter results and management's outlook all largely align with our previous views of CIBC, we maintain our current fair value estimates of CAD 70/USD 51, and we view shares as moderately overvalued.