# CIBC Canadian Imperial Bank of Commerce (CM.TO, CM)



## Daryl-Manitoba (Sep 14, 2010)

CIBC increased their dividend today by 2.1% from 94¢/share to 96¢/share.

Between the banks that have a DRIP and SPP plan (BMO, BNS) it looks like CIBC performed the best over the last quarter.


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## doctrine (Sep 30, 2011)

Profit of $2.12 a share. That gives them a new payout ratio of 45%, and a P/E of 9.5. Slow growing, but still increasing revenues and profits.


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## Toronto.gal (Jan 8, 2010)

I'll take it!

I'm not paying much attention, just DRIPing the CDN banks and accumulating shares!


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## My Own Advisor (Sep 24, 2012)

Toronto.gal said:


> I'll take it!
> 
> I'm not paying much attention, just DRIPing the CDN banks and accumulating shares!


Me too


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## Echo (Apr 1, 2011)

Looks like they might be moving away from their long-standing agreement with Aeroplan in favour of developing their own premium travel rewards card - http://ca.finance.yahoo.com/news/ci...-beats-earnings-estimates-bank-104048804.html


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## Cal (Jun 17, 2009)

My wife holds it in her account, I will let her know she just got a raise!


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## daddybigbucks (Jan 30, 2011)

i want to buy in but CM's chart is so fugly.


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## Eder (Feb 16, 2011)

I'll wait till summer when the world is ending again to buy more.


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## thompsg4416 (Aug 18, 2010)

I can't buy right now but I'm looking at it. Of all the banks in Canada it is trading at the lowest PE and offers a 4.99% yield.

I don't like the idea of thier own premium travel rewards card though. For now I'll stick with my BNS.


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## doctrine (Sep 30, 2011)

CIBC had a great quarter and now increased their dividend for the 3rd year in a row, with a very good payout ratio still at 45%. 5% yield. 8% earnings growth year over year. Still one of my favorite banks to own.


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## fatcat (Nov 11, 2009)

of the big 5 banks cibc is the most exposed to a candian housing correction and consumer debt ..

http://www.reuters.com/article/2013/05/01/us-cibc-growth-idUSBRE9400YA20130501


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## james4beach (Nov 15, 2012)

Honestly I'm more worried about TD and their massive US loan exposure. While the Canadian housing market is overheated, I still suspect that the US has worse quality loans overall.


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## My Own Advisor (Sep 24, 2012)

All the banks have risks....

I buy them and own them anyhow.


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## doctrine (Sep 30, 2011)

I feel the risk vs reward is justified although would not recommend a 50% weighting in CIBC either! Overall the banks are ~17% of my Canadian stocks, which is actually less than their weighting in either the TSX 60 (where it is 28%) or the TSX Composite (21%).


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## 1sImage (Jan 2, 2013)

I was thinking of getting some aswell.

I believe this stock will split soon.


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## Jungle (Feb 17, 2010)

Personally, I like RY, BNS and TD, as their revenue is more diversified. Also their annual div increases have been between 5-12%/ year in some cases. I'm still holding CM in a taxable account from a past buying opportunity. Won't sell, but won’t add any vs the other banks.


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## james4beach (Nov 15, 2012)

So I take it that none of you are too concerned about the insanely high leverage (around 31x) at all of these banks?

Do you realize that if the bank suffers surprise losses, it's equity -- your shares -- that are directly on the line? The higher the leverage, the more susceptible equity is to sharp losses. Here is what the balance sheet of the big five banks looks like

$31 assets = $30 liabilities + $1 equity [ illustrating 31:1 leverage ]

Now if the assets (loans, real estate, bonds) suddenly suffer a tiny decline of just 3%, the left side becomes $30 and your equity gets wiped out.


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## cainvest (May 1, 2013)

james4beach said:


> So I take it that none of you are too concerned about the insanely high leverage (around 31x) at all of these banks?


I own funds containing the major banks, I'm not concerned.


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## james4beach (Nov 15, 2012)

cainvest said:


> I own funds containing the major banks, I'm not concerned.


But why are you not concerned? I'm genuinely curious. Is it because you think it's very unlikely the banks would ever incur those 3% losses in their assets ... or is it because you think they would quickly recover from any losses by raising more capital ... or is it because you're diversified among several banks and therefore if one has losses, the others are probably still ok?


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## Eder (Feb 16, 2011)

CIBC tier1 capital ratio is around 13.8%

Capital ratios are a measure of the amount of a bank's core capital expressed as a percentage of its risk-weighted assets...seems good to go for me if the div,pe,and payout ratio is OK.

I think Apple, Netflix, Enbridge,Teck,Meryk all offer much larger inherent risk than our nanny protected banks (I love em).


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## cainvest (May 1, 2013)

I would think the banks are not going to teeter themselves on the edge of destruction but of course, bad things can happen. If things do go south I would believe the feds would step in and not let it fail. And yes, spreading out the investment over all of the major banks would/could help limit the downside, i personally would not invest in one single bank over the others.

Questions back your way, how likely is it that one of the major banks would fail? Would a full blown recession be required to create the environment you described above (loans, real estate, bonds falling 3%) and could the banks counter this in some way as its falling?


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## james4beach (Nov 15, 2012)

cainvest said:


> I would think the banks are not going to teeter themselves on the edge of destruction but of course, bad things can happen. If things do go south I would believe the feds would step in and not let it fail. And yes, spreading out the investment over all of the major banks would/could help limit the downside, i personally would not invest in one single bank over the others.
> 
> Questions back your way, how likely is it that one of the major banks would fail? Would a full blown recession be required to create the environment you described above (loans, real estate, bonds falling 3%) and could the banks counter this in some way as its falling?


First of all you don't have to get a bank failure. Large losses will result in enormous losses to equity (that means you, the stock holder). The bank doesn't have to fail to create a disaster for you, the shareholder.

Second just because the government bails out a bank, doesn't mean any of your equity is preserved! The USA is full of companies that were totally bailed out, yet all of their stocks have crashed and never recovered.

I just don't follow any of this logic. Yes the big banks probably won't fail or be allowed to fail ... so? They could still incur big losses that wipe out equity, this has nothing to do with them actually failing. All of what you said is true, but none of these things protect your equity investment in any way. At current bank leverage, a 1.6% decline in their assets results in the loss of HALF the bank's equity. The bank would not fail. But your investment would be wiped out, no matter how much the government assists the bank.


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## cainvest (May 1, 2013)

True, the potential for having a capital loss does exist, despite the feds backup. None of the things I've said protect you ... true if ALL the banks fail, as I said, I'd never own just one so there is some protection via diversafication. Assuming near equal distribution, you've limited your total losses to 20% maximum if you only owned the 5 banks. Of course peoples portfolio should be much, much more diverse than just holding these banks so in the end you're looking at what (worst case) ... maybe a 2-5% total loss in ones portfolio?


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## james4beach (Nov 15, 2012)

The problem is that whatever causes losses at one bank is likely to also cause losses at all the banks, e.g. declining Canadian housing or international trouble. I don't think any of them will fail, but I think all of them will more or less simultaneously take big losses. There's no way to know when that happens (and maybe they tick along for another 10 years with no losses).


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## blin10 (Jun 27, 2011)

people always like to talk about so called bubble and have been doing so for last 10 years, while people like me were buying it up and laughing all the way to the bank... I'm not delusional, anything can happen down the road, there might be a correction but in my opinion it will not be anything close to what happened in states because banks don't land to anyone or make up fake loan grades, and considered the best in the world for a reason... there are also a ton of people waiting for pull back, so if pull back does happen a ton of people ready to step in and replace them... lastly if you worry about rates rising, banks are in bed with government, they will not do anything suicidal 



james4beach said:


> The problem is that whatever causes losses at one bank is likely to also cause losses at all the banks, e.g. declining Canadian housing or international trouble. I don't think any of them will fail, but I think all of them will more or less simultaneously take big losses. There's no way to know when that happens (and maybe they tick along for another 10 years with no losses).


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## birdman (Feb 12, 2013)

I spent a lifetime in the financial services industry and for what its worth I don't have too many concerns over the Candian Banks. Its simple to pick out one or two things and hypothetical situations but from my perspective the Banks are well managed, practise good credit adjudication, have adequate equity, sound interest rate risk managment practices, etc. I have seen interest rates go to 22 3/4% (prime rate) in the early 1980's to 3% today and they got through it all. Of course loan losses were up with a 22.75% prime rate but on the other hand, margins were probably great. Banks assets do not just consist of loans but also securities, G/C bonds, cash, and loans to governments, municipalities, and CMHC loans all of which probably carry minimal risk. Mortgages are generally at a maximum loan to value of 75% and as most mtges are probably paid down some the overal loan to value ratio would not be that high. For example, somone who has had a mtge. for 10 years probably has reduced their amount owing to perhaps 60% of what it was and the property value has probably increased over those 10 yrs. In regards to business lending I believe there are limits to how much they lend to any one area (eg oil sands development or ???) and furthermore, for smaller businesses in order to get a loan the business must be profitable, personal g'tees are required and of course there is security taken. If I recal correctly, they generally do not lend more than about 50% of accts rec'ble or inventory (at cost).
Its a very involved business but it seems to me if the Canadian banks can go through the depression and survive, go through 22% interest rates and survive, go through 1% rates and survive, they must be doing something right. I don't believe any bank has ever cut their divy during this time (not sure on this though).
Please make your own decisions and come to your own conclusions but I'm not concerned and hope I'm not wrong as I am 50% invested in Banks.

%


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## gibor365 (Apr 1, 2011)

regarding cutting dividends....I'm unsure too, but read article that Canadian bnaks didn't cut dividends since WWII


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## gibor365 (Apr 1, 2011)

Toronto.gal said:


> I'll take it!
> 
> I'm not paying much attention, just DRIPing the CDN banks and accumulating shares!


Same here...


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## MrMatt (Dec 21, 2011)

*CIBC low?*

Why is CIBC yielding so much?

I'm not a big fan of the bank, but that extra yield, compared to peers, looks nice.

What's going on with the company?


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## fatcat (Nov 11, 2009)

MrMatt said:


> Why is CIBC yielding so much?
> 
> I'm not a big fan of the bank, but that extra yield, compared to peers, looks nice.
> 
> What's going on with the company?


i sold mine ... i am just going to guess that it is because it has been the object of so much press as the big-5 bank with the greatest exposure to the canadian housing market


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## AltaRed (Jun 8, 2009)

That plus CIBC has a long history of running into blunt objects (like Enron). Those miscues may well be behind them now but only time will tell. I've never owned CIBC (albeit I have both a chequing account and a Visa card with them).


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## doctrine (Sep 30, 2011)

CIBC has had an above average yield for the last 10 years at least. They have really good earnings though and have 3 dividend increases since 2011. Their payout ratio is quite low and their Tier 1 capital is amongst the best of all the banks at 9.7%. They have a P/E at 9.5 or so and a payout ratio of 45%. There's not much I don't like. They are probably down because they are not diversified outside Canada but you are rewarded with a good dividend and earnings ratio for this risk.


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## fatcat (Nov 11, 2009)

doctrine said:


> CIBC has had an above average yield for the last 10 years at least. They have really good earnings though and have 3 dividend increases since 2011. Their payout ratio is quite low and their Tier 1 capital is amongst the best of all the banks at 9.7%. They have a P/E at 9.5 or so and a payout ratio of 45%. There's not much I don't like. They are probably down because they are not diversified outside Canada but you are rewarded with a good dividend and earnings ratio for this risk.


good points doctrine ... there has been a lot of talk about canadian banks not keeping up and those that have exposure outside the home market likely to do better ... td and royal come to mind especially


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## james4beach (Nov 15, 2012)

GreatPonzi also reports balance sheet health stats on CIBC

Their loan quality looks pretty good, with less impaired loans than the average Big Five bank.

For capitalization (using the most conservative tangible common equity, with Basel III's CET1 capital) CIBC is slightly more leveraged = slightly less capitalized than the average. But there's not a big difference between the banks.

CIBC has the *smallest* notional off balance sheet derivative exposure, at only $1.8 trillion. RBC for instance has $7.5 trillion.

But these things I'm quoting are just vague metrics. Each bank has their own unique exposures and we don't know where the next crisis will come from. For instance if there are big American bank problems, then TD (with huge US exposure) will be hit hard.


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## My Own Advisor (Sep 24, 2012)

"Tier 1 capital is amongst the best of all the banks at 9.7%"....payout ratio <50%. Great reasons to own it. 

Let others sell, I will buy their shares gladly especially with another dividend hike to come over the next year or so.


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## londoncalling (Sep 17, 2011)

I remember reading an article a couple of years ago that buying the largest yielder of the big 5 will provide the best returns. I did that with RY about 18 months ago for a 5% + yield and am happy I chose RY over TD. It all depends on what you are after. If you are diversified globally, need income, etc. I have a bid in on CM that has yet to materialize. I will keep watching and waiting.

Cheers


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## james4beach (Nov 15, 2012)

MrMatt said:


> Why is CIBC yielding so much?
> 
> I'm not a big fan of the bank, but that extra yield, compared to peers, looks nice.


Wait I want to go back to basics here on the OP.

CIBC stock is low? You're determining that based on the dividend yield, I presume.

This was the same kind of flawed reasoning I used in my I think TSX is overvalued on yield basis thread, right?

Others replied and pointed out that this is a pretty crude way to tell if something is under/over valued... you should actually look at valuation metrics. Yield doesn't tell you much, really.

How does CIBC compare to the others on P/E and price/book?


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## thompsg4416 (Aug 18, 2010)

james4beach said:


> Wait I want to go back to basics here on the OP.
> 
> CIBC stock is low? You're determining that based on the dividend yield, I presume.
> 
> ...


It was mentioned above " P/E at 9.5".... Anything under 10 is quite good from what I gather. I've been looking at this one for the last month to add to my long term holds/Core positions. Only problem is I already own BNS and I don't have any free cash left at the moment otherwise i would have pounced


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## doctrine (Sep 30, 2011)

TD: 12
RY: 12
BNS: 11
BMO: 11
CM: 9.5
NA: 9

Historically, the banks had P/Es closer to 15-20. I believe the lower P/E reflects higher risk of slow growth especially in housing. In my opinion, that's fair, and even maintaining earnings with zero growth will price a solid earnings yield. NA remains my favorite at the moment if I was purchasing more shares, followed by CM.


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## james4beach (Nov 15, 2012)

Sometimes for a quick cheat I also look at the BMO ETF 'enhanced fund profile' pages. That's showing, for the 6 banks, at June 30. Average P/E 10.4 and P/B 1.8

One potential concern is that Canadian banks are among the highest in the world for price/book ratios. The Bank of Canada financial system review says "Canadian bank stocks are trading at prices that, on average, are about 90 per cent above their book value, markedly higher than in many other countries (Chart 6)"

Click to see chart:








So Canadian banks are by no means 'cheap' in global terms. Basically they're valued highly because so far, loan losses are low and there is no major economic problem in Canada. This is definitely a good thing but as an investor I wonder, if they're already valued so highly... is there more up side, or down side?


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## fatcat (Nov 11, 2009)

james4beach said:


> Sometimes for a quick cheat I also look at the BMO ETF 'enhanced fund profile' pages. That's showing, for the 6 banks, at June 30. Average P/E 10.4 and P/B 1.8
> 
> One potential concern is that Canadian banks are among the highest in the world for price/book ratios. The Bank of Canada financial system review says "Canadian bank stocks are trading at prices that, on average, are about 90 per cent above their book value, markedly higher than in many other countries (Chart 6)"
> 
> ...


a simple answer is that investors think they are solid and well run and thus worth the premium over book ... the chart makes sense


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## Sampson (Apr 3, 2009)

thompsg4416 said:


> It was mentioned above " P/E at 9.5".... Anything under 10 is quite good from what I gather.


Not a rule by any measure.

The valuations investors are willing to pay can change on a dime, recall the dot.com bubble as prime example or how much people are willing to pay these days for tech stalwarts Cisco and Intel.

Look at what valuations people have been paying on US banks over the past five years. This amount changes.


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## Toronto.gal (Jan 8, 2010)

My Own Advisor said:


> 1. Let others sell, I will buy their shares gladly...
> 2. especially with another dividend hike to come over the next year or so.


*1.* I probably bought fatcat's shares last month @ under $76! We all provide liquidity to the markets.  

In 2011, RY was my big target for accumulation, and don't mind at all if it's CM's turn now.

*2.* The next hike is coming on July 29th [$.96 vs $.94 paid last quarter]. At last div. payment, shares were dripped at $78.57, so not much change from last Q.


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## MrMatt (Dec 21, 2011)

james4beach said:


> Wait I want to go back to basics here on the OP.
> 
> CIBC stock is low? You're determining that based on the dividend yield, I presume.
> 
> ...


Based on many of the typical valuation criteria, (Div yield, P/E etc) CIBC is cheaper than the other big banks, I'm wondering why.
It wasn't in my post, but I was also considering some of the other common ratios. 

The big banks tend to track each other quite well, and it looks like this is one of those times where one has fallen behind on valuation, I'm wondering if there is an opportunity, or is there something wrong enough to warrant it.
The other banks are 10-20% more expensive.

Compared to the linked thread of yours, there is a significant difference.
Bond yield vs index dividend yield are very different animals for a number of reasons, however comparing investments, within the appropriate peer group adjust for a lot of them.


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## Jungle (Feb 17, 2010)

Have not seen this mentioned but, according to this article, CIBC expected to take a 10% eps hit, due to the loss of the Aeroplan rewards program. 

http://business.financialpost.com/2...-to-take-hit-as-aeroplan-switches-to-td-bank/

TD is supposed to be taking on Aeroplan.


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## MrMatt (Dec 21, 2011)

Jungle said:


> Have not seen this mentioned but, according to this article, CIBC expected to take a 10% eps hit, due to the loss of the Aeroplan rewards program.
> 
> http://business.financialpost.com/2...-to-take-hit-as-aeroplan-switches-to-td-bank/
> 
> TD is supposed to be taking on Aeroplan.


Ahhh, that's a good point, glad TD picked it up.


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## PatInTheHat (May 7, 2012)

CIBC definitely the best value right now if you are looking to buy in. BNS probably a close 2nd.


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## Jungle (Feb 17, 2010)

Especially since RY is leading the pack in returns right now. Even TD has stepped up, it was rather flat, for the first half of the year.
But I have a tough choice to make, I need to sell some stock and it's coming down to a CM vs TD.. I like TD, but I've held CM for a while now.


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## doctrine (Sep 30, 2011)

TD is the only big bank I don't own... just because it has the highest P/E. RY has been doing just as good.. especially on the shares I bought at $47.90 in Sep 2011.


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## Jungle (Feb 17, 2010)

That's crazy my average cost is about the same, and I dumped a lot of money in Ry, it's our largest holding. But the bad news is that I am probably overweight bank stock, which is why I want to trim back.


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## Jungle (Feb 17, 2010)

CIBC says it want's to keep about half the Aeroplan acconts now, stock up 1.8% on this:

http://money.msn.com/business-news/article.aspx?feed=OBR&date=20130812&id=15280854


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## Lena100 (Mar 16, 2014)

Why is the street not liking CM, downside is from 99 plus change to 95 plus change. I thought people would be bribed by dividend increase to $1.00


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## doctrine (Sep 30, 2011)

The results looked good to me on an adjusted basis, but it perhaps signals lower growth in the Caribbean, which was a potential growth area for them. $1 dividend on $2.17 of adjusted earnings is a great 46% payout. I'm used to buying CIBC at 5%+ yields but with 4.2% here, it's still a good price and the payout has been coming down in the last few years.

I like the steady dividend increases, two quarters in a row now, and four increases since August 2012. I think CIBC will split the stock in the next 12 months, which will also be a positive.

This drop makes CM about as attractive as NA and BMO as well. You've got CM, NA and BMO trading at 4.1-4.2% yields and RY, BNS and TD trading at 3.5-3.8% yields - a bit of a separation, but I'd definitely take a 20% head start on dividends from the bottom three.


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## My Own Advisor (Sep 24, 2012)

Only more than happy to DRIP all CDN banks. I figure if they go under, we're all doomed


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## kcowan (Jul 1, 2010)

I never trust CM. Maybe that makes me a contrarian. They always seem to be front and centre for the latest way to lose money.

I hope I am wrong.

(I have been amazed at how they have managed to screw up the Aeroplan CCs. We have $500k invested with WG but are not considered good enough for them. So we will be forced to move to Amazon Visa.)


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## My Own Advisor (Sep 24, 2012)

WG? Wood Gundy?

CIBC is no darling for sure but they've been a star for a few years with other CDN banks in terms of returns. I hope the stock splits soon...


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## kcowan (Jul 1, 2010)

My Own Advisor said:


> WG? Wood Gundy?


yes apparently it is an integral part of their operation. But to me it is amazing that they consider it separate from their "banking" operation. I have my pension deposited in my investment account and I have a cheque book for paying expenses. It seems a lot like a bank to me!


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## AltaRed (Jun 8, 2009)

kcowan said:


> yes apparently it is an integral part of their operation. But to me it is amazing that they consider it separate from their "banking" operation. I have my pension deposited in my investment account and I have a cheque book for paying expenses. It seems a lot like a bank to me!


I think Wood Gundy is a separate corporate entity for a variety of regulatory reasons but integrates investment and chequing. Do you not have 2 account numbers, i.e. one for the brokerage account and one with a transit number like a chequing account?

BMO IL does something similar through a My Link chequing account. The BMO chequing account is tied to the brokerage account and any cash balances show up in both places. Wood Gundy may make it look more seamless


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## kcowan (Jul 1, 2010)

Yes I think they probably agreed with TD to transfer all "banking" customers, narrowly defined as CIBC retail. It is a shame because we all lose.


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## My Own Advisor (Sep 24, 2012)

Fair kcowan, thanks for the response.


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## Ponderling (Mar 1, 2013)

Have owned before, sold back in 2018 when I had a surplus of financials holding value, and at the time CM had the weakest outlook at that time.

Today I am a bit underweight in financials so back into CM for the next while.


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## KaeJS (Sep 28, 2010)

Yikes.

That's a pretty bad Q4...


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## londoncalling (Sep 17, 2011)

I hadn't paid any attention as I do not own the stock but upon review I would agree. It definitely did not perform to the level that the other banks did this quarter. Attempting to retake its place as the perpetual Canadian bank underperformer from BNS?


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## KaeJS (Sep 28, 2010)

I own a small amount. I own all the banks, but it is my smallest position.

I think they are gonna have a couple years of trouble ahead of them. Did not like what I saw in the report.

Could be an opportunity 6-12 months down the line for a high yield out of this one.


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