Scotia Capital, 1 June 2012
• CM cash operating EPS increased 9% YOY to $2.00, a solid beat.
• Operating ROE (industry high): 23.3%, RRWA (highest): 2.91%, CET1 (highest): 8.5%.
Implications
• Earnings were driven by strong results from Retail & Business Banking, up 12% YOY, with Wealth Management also solid, up 8% YOY and rebounding 23% sequentially. Wholesale earnings declined 11% YOY and 3% QOQ.
Recommendation
• Our 2012E and 2013E EPS are unchanged at $8.05 per share and $8.80 per share. Our one-year share price target is unchanged at $93 per share based on a target P/E multiple of 10.6x our 2013 earnings estimate.
• We believe CIBC has upside potential to gain market share in various retail and business banking products as it has an 18.6% market share in terms of a domestic branch network, yet only 8.1% market share in CIBC branded mortgages. Clearly the CIBC branch channel is underutilized and has significant upside potential. We reiterate our 1-Sector Outperform rating based on upside potential from retail branch network, industry high profitability and capital, large valuation discount, as well as prospects for significant accretive share buybacks.
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• CM cash operating EPS increased 9% YOY to $2.00, a solid beat.
• Operating ROE (industry high): 23.3%, RRWA (highest): 2.91%, CET1 (highest): 8.5%.
Implications
• Earnings were driven by strong results from Retail & Business Banking, up 12% YOY, with Wealth Management also solid, up 8% YOY and rebounding 23% sequentially. Wholesale earnings declined 11% YOY and 3% QOQ.
Recommendation
• Our 2012E and 2013E EPS are unchanged at $8.05 per share and $8.80 per share. Our one-year share price target is unchanged at $93 per share based on a target P/E multiple of 10.6x our 2013 earnings estimate.
• We believe CIBC has upside potential to gain market share in various retail and business banking products as it has an 18.6% market share in terms of a domestic branch network, yet only 8.1% market share in CIBC branded mortgages. Clearly the CIBC branch channel is underutilized and has significant upside potential. We reiterate our 1-Sector Outperform rating based on upside potential from retail branch network, industry high profitability and capital, large valuation discount, as well as prospects for significant accretive share buybacks.
