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Bank of America Securities upgraded Canadian Imperial Bank of Commerce (NYSE:CM), known as CIBC, to Buy from Neutral as analyst Ebrahim H. Poonawala sees the potential for strong execution and an improving return on earnings outlook to narrow the stock’s relative valuation gap with its peer Royal Bank of Canada (RY).
“In addition to the strong execution, the potential for the Canadian economy to stage a rebound next year also increases our confidence in adding exposure to the stock,” the analyst wrote in a note to clients. He pointed out that Canada’s economy has served as an overhang on his outlook for the stock, with ~80% of earnings derived from the country.
“While not out of the woods, 3Q24 results from the banks suggest to us that the risk of a material deterioration in credit quality is likely a low probability event,” Poonawala said. “Particularly given the drop in interest rates across the yield curve that should alleviate some of the pressure on the consumer tied to upcoming mortgage repricing.”
The “steady execution” from CIBC’s (CM) current management team is helping to turn around investor perception, following a period of execution missteps going back 10-20 years, he noted.
BofA raised its EPS estimates for CIBC (CM) to C$7.52 from C$7.35 for FY 2025 and to C$8.10 from C$7.96 for FY2026, or ~5% above consensus on average.
The Buy rating on the bank compares with the SA Quant rating of Strong Buy and the average SA Analyst rating of Buy, while diverging from the average Wall Street rating of Hold.
CIBC (CM) stock rose 0.6% in Friday premarket trading.
