For investors looking at top Canadian bank stocks, there are a number of factors to consider. These are obviously top dividend stocks many retirees and those nearing retirement consider for their passive-income potential. However, certain banks have better growth profiles than others, with varying levels of diversification tied to their business lines and geographic footprints.
One such stock I think is particularly interesting to look at is Canadian Imperial Bank of Commerce (TSX:CM). This leading Canadian bank is part of the “Big Five” and is more heavily exposed to the Canadian economy than its peers.
Let’s dive into whether this bank stock is a buy, sell, or hold right now.
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What makes CIBC different?
Unlike many of its competitors in the Canadian banking space, CIBC has remained increasingly focused on the domestic Canadian market, with a considerable mortgage and corporate lending portfolio that positions this bank as a leading way for investors to gain exposure to the Canadian economy.
In other words, for those bullish on where Canada is headed over the next five to 10 years, this is a bank stock that may be a viable way to play this trend.
The Canadian economy has continued to provide slow but steady growth over time. However, with interest rates coming down faster than many of its G7 peers thanks to the Bank of Canada, some analysts project that growth could pick up. Indeed, if the country’s overall growth rate improves (and the credit quality of consumers and businesses as well) faster than the global market, this could be a top way to play this trend. Currently, opinions vary on this front — headwinds are starting to be seen in the housing market. But if Canada can once again weather the storm clouds on the horizon, this bank could be poised for a nice reversion rally moving forward.
Results matter
For investors considering investing in CIBC, I’d recommend watching the company’s incoming earnings reports closely. This is a bank stock that’s seen a relative discount compared to its peers for some time. And trading at less than 13 times earnings, one could make the argument that there’s some serious value here.
However, headwinds related to the housing market could provide some headwinds over time, particularly if the Canadian housing market cools considerably from here. We’ll have to watch how lending growth continues and see if CIBC can maintain its 7.5% EPS growth (the rate seen in recent quarters) in the coming year.
If the company can see sustained growth from here, its multiple may be validated, and higher highs could be seen in the coming quarters.
I’m cautious right now
CIBC is a top Canadian bank that’s seen a considerable amount of buying pressure of late as the outlook for the Canadian economy has improved. That said, I’m still remaining cautious with this name, as I’m not entirely certain that economic headwinds have abated domestically.
A soft landing scenario is certainly the consensus most analysts are now forecasting in the U.S. and Canadian markets. We’ll have to see how this plays out. For those looking at making a medium-term investment in this name, I think taking a cautious approach is likely warranted, though I think this stock is one that should do fine over the long term.
