CIBC vs. Scotiabank: Which Is the Better Buy Today?

CIBC (TSX:CM) and Scotiabank (TSX:BNS) are bank stocks that offer similar value and income, but I’m favouring one in late September.

| More on:
data analyze research

Image source: Getty Images

The S&P/TSX Capped Financial Index fell 1.84% on Thursday, September 21. Financials is the largest sector on the TSX Index. The sector is powered by the Big Six Canadian banks, the largest financial institutions in the country. Historically, these profit machines have offered great balance to investors as blue-chip stocks while also serving as a symbol of stability for the broader Canadian financial system.

Today, I want to compare two of the top Canadian bank stocks: Canadian Imperial Bank of Commerce (TSX:CM) and Scotiabank (TSX:BNS). In this piece, I want to determine which bank stock is the better buy right now. Let’s jump in.

The case for CIBC in late September 2023

CIBC (TSX:CM) is the fifth largest of the Big Six Canadian bank stocks. While CIBC does not boast the market cap of some of its larger counterparts, this bank stock is still a force in the financial space. Shares of CIBC have increased 2.3% month over month as of close on Thursday, September 21. Meanwhile, the bank stock is still down 1.7% so far in 2023.

This bank released its third-quarter (Q3) fiscal 2023 earnings on August 31. CIBC reported total revenue of $5.85 billion in Q3 2023 — up 5% compared to the previous year. Meanwhile, the bank reported adjusted net income of $1.47 billion, or $1.52 in adjusted diluted earnings per share (EPS). That was down 15% and 18%, respectively, compared to Q3 2022. Like its peers, CIBC saw its earnings take a hit due to a spike in provisions set aside for credit losses.

Net income in its Canadian Personal and Business Banking segment dropped 16% year over year to $497 million. CIBC posted higher revenues in its Canadian retail banking business, but that was offset by a jump in provisions set aside for credit losses and credit losses. CIBC’s Capital Markets segment delivered net income growth of 11% to $494 million.

Shares of CIBC currently possess a favourable price-to-earnings (P/E) ratio of 11. Meanwhile, the stock offers a quarterly dividend of $0.87 per share. That represents a tasty 6.3% yield.

Here’s why I’m still bullish on Scotiabank stock

Scotiabank (TSX:BNS) is the fourth-largest Canadian bank stock by total market cap. It is frequently referred to as “The International Bank” because of its large global footprint, particularly in Latin America. Its shares have jumped 2.9% month over month as of close on September 21. Meanwhile, the bank stock is still down 2.7% in the year-to-date period. Investors can play with the interactive price chart below to see more of its past performance.

In Q3 2023, Scotiabank reported adjusted net income of $2.22 billion, or $1.73 diluted earnings per share (EPS)– down from $2.61 billion or $2.10 in diluted EPS in the previous year. Moreover, total revenue rose marginally to $8.09 billion. Provisions for credit losses nearly doubled at Scotiabank in Q3 2023 to $819 million.

This bank stock last had an attractive P/E ratio of 10. Meanwhile, Scotiabank offers a quarterly distribution of $1.06 per share, which represents a very tasty 6.6% yield.

Which bank stock is the better buy?

Both CIBC and Scotiabank are neck-in-neck in terms of the value and income they offer at the time of this writing. However, I’m inclined to snatch up CIBC as my favoured pick today due to its reliance on the Canadian economy. Scotiabank’s global reach has been an advantage over the past decade, but Latin American economies are struggling mightily.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

More on Bank Stocks

calculate and analyze stock
Bank Stocks

4% Dividend Yield? I Keep Buying This Dividend Stock in Bulk!

If you find the perfect dividend stock, you never have to worry about investing again. And that's what you get…

Read more »

Investor reading the newspaper
Bank Stocks

Is Canadian Imperial Bank of Commerce Stock a Good Buy?

Let's dive into whether Canadian Imperial Bank of Commerce (TSX:CM) is a top buy, sell, or hold right now.

Read more »

Man data analyze
Bank Stocks

Where Will BNS Stock Be in 3 Years?

Bank of Nova Scotia is primed for growth with a bold U.S. expansion, steady dividends, and a value focus that…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Stocks for Beginners

TFSA 101: Earn $1,596.60 per Year Tax-Free!

Investors don't have to buy some risky stock if they want tax-free high income. Instead, buy this top stock instead.

Read more »

data analyze research
Bank Stocks

TD Bank: Buy, Hold, or Sell Now?

TD is underperforming its large Canadian peers this year. Is a rebound on the way?

Read more »

data analyze research
Bank Stocks

A Dividend Bank Stock I’d Buy Over TD Stock Right Now

TD stock has long been a strong dividend and growth provider. However, recent issues could cause investors to think twice.

Read more »

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.
Bank Stocks

Where Will TD Stock Be in 1 Year?

TD Bank (TSX:TD) stock could heat up again as we enter a new year with a new manager and potentially…

Read more »

Confused person shrugging
Bank Stocks

Royal Bank vs. National Bank: Where Should You Park Your Investment Capital?

If we go by growth alone, it's easy to identify the top contender in the Canadian banking sector, but a…

Read more »