CIBC CM Q1/F10 Summary

admin — Fri, 26 Feb 2010 15:36:49 +0000

CIBC (CM) – $70.00 – Q1/F10 Summary
Sell, Intrinsic Value Estimate: $69.00
Veritas states that Q1 results were a step in the right direction for CIBC, with the bank taking steps towards delivering on the operating and credit recovery that Veritas consideres already priced into the stock at $70. Reported earnings were $652M [compared to $644M in Q4-F09], and adjusted earnings of $654M were down 1.7% against adjusted earnings a year ago though up 13.5% against Q4. One-time items this quarter netted to between $2M and $20M, but the gross one-time items were material and necessarily complex – gains on improvements in sub-prime valuations and monoline spreads, further complicated by steps taken by the Commerce to unwind its nettlesome sub-prime and non-sub-prime exposures. The case for caution on this name is nevertheless compelling. Veritas remains concerned about the potential performance of the structured credit run off book during a[nother] downturn. Quarter-in, quarter-out through the recovery, the $13B CLO portfolio and its underlying components continue to migrate while the aftershocks of the credit crunch – such as potential litigation from the Lehman estate – and the aftershocks of Enron continue to reverberate at Commerce Court. Veritas concludes that CIBC’s first quarter was positive in the sense that it was the second positive loan loss quarter in a row, the retail business may have bottomed out, and CIBC World Markets continues to generate above expectation earnings. Investors must decide, however, whether CIBC’s P:E discount to peers compensates for the following risks: the structured credit overhang, potential for capital markets earnings normalization, credit risk on cards and a few high-risk, high yield loan portfolios, and a few sharp objects still in its path.

CIBC CM Q1/10 EPS ahead of expectations on credit and wholesale revenues

admin — Fri, 26 Feb 2010 15:35:16 +0000

CIBC (CM): $69.95 – Q1/10 EPS ahead of expectations on credit and wholesale revenues
Sector Perform, Average Risk, Price Target: $82.00
CIBC’s Q1/10 EPS were ahead of expectations on lower loan losses and better than expected wholesale revenues. Capital ratios were higher than our forecast as risk weighted assets declined. Q1/10 cash EPS were $1.60 compared to RBC CM estimate of $1.58, and core cash EPS were approximately $1.65 versus RBC CM estimate of $1.44 and consensus of $1.42. Core retail banking income of $528 million was slightly below our estimate driven by lower than expected revenues, offset by lower than expected expenses. The Tier 1 ratio of 13.0% was above RBC CM 12.2% estimate and up from 12.1% in Q4/09RBC CM increased its 2010 and 2011 core cash EPS forecasts by $0.39 and $0.25, respectively, to $6.20 and $7.20 to reflect lower than previously anticipated credit losses. RBC CM will review its ratings and estimates for all banks it covers as part of the industry review we will publish once all banks have reported.

TSX Commentary » CIBC

CIBC CM Q1/F10 Summary

CIBC CM Q1/10 EPS ahead of expectations on credit and wholesale revenues