(Bloomberg) -- After years of lagging returns and more recent concerns over US office loans, Canadian Imperial Bank of Commerce has turned a corner with investors. Chief Executive Officer Victor Dodig says he won’t put that at risk with acquisitions that reduce shareholder value.
“The investor sentiment fundamentally says that CIBC is a changed bank,” Dodig said in an interview with Bloomberg News. This, he said, comes after a steady focus on courting affluent Canadians as clients, investing in technology and digitization and targeting privately owned businesses and entrepreneurs in the US.
Dodig, 59, who has led Canada’s fifth-largest bank for more than a decade, laid out the bank’s relatively straightforward strategy at CIBC’s most recent investor day in June 2022.
“We don’t want to be doing something large that would make us take a step back,” Dodig said last week, adding that he remains open to an “interesting” acquisition that improves return on equity.
“But it really is focused on organic growth and tuck-in acquisitions, particularly in the wealth-management space, which are capital light and would strengthen our hand in a business that we’re very good at,” he said.
Office Drag
CIBC’s revamped strategy wasn’t an immediate success. The lender was initially dogged by a reputation for costly mistakes in the past — it was caught up in Enron Corp.’s bankruptcy and took big writedowns on securities linked to US subprime mortgages during the financial crisis. By the middle of 2023, signs of distress emerged in its US commercial lending book.
The lender had a higher exposure to the troubled US office space than its peers and took a series of large provisions against potentially bad loans in the sector.
But after taking steps to reduce its exposure to such debt, CIBC’s credit performance has been strong for most of this year. With that in hand, investors have turned their focus to the bank’s revenue growth, cost controls and strong execution, sending the stock to new all-time highs.
“CIBC put up the best results this earnings season, followed by Royal Bank, both of which continued to deliver solid and consistent numbers along with strong guidance for next year,” Bank of Nova Scotia analyst Meny Grauman wrote to clients last week.
Grauman has a buy rating on the stock and a one-year price target of C$114, or about $80, significantly higher than the consensus among analysts of C$97.73. CIBC’s shares have been hovering above C$94.
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