Thursday, January 10, 2008

CIBC A History of Screw Ups and a Time to Buy?

CIBC certainly seems to be unique among the big 5 Canadian banks. They have made themselves unique by the fact that they can’t seem to be able to avoid screwing up. They seem to have an innate ability to identify and then participate in risky market shenanigans. Let’s briefly take a look at some of the more recent debacles.

Dec 22, 2003
Canadian Imperial Bank of Commerce agreed to pay 80 million dollars to settle US charges that it aided Enron's financial fraud and pledged to assist a federal criminal investigation

August 2005
They took a $2.5 billion after-tax charge against its profit in the third quarter ended July 31, 2007 to cover the payment and other Enron issues.

After taking this huge write down in 2005 CIBC was adamant about avoiding “risky investments”. Just 2 short years later they announced that they would incur approximately $1 billion in charges due to their exposure to the U.S sub-prime mortgage market. However, many analysts now believe that CIBC will need to write down a further $2 billion. As a potential investor a $3 billion dollar write down while at the same time having a mandate of “avoiding risky investments” is unacceptable. The market seems to agree with me and the stock has been hammered down to about $67/share from it’s 52 week high of $107. In response to their latest disaster there has been some major changes in senior management at CIBC including a new Risk Officer, Chief Financial Officer and Chief Executive Officer.

This stock has been punished and deserved it. However, I think there is some real hidden value here and in my next post I’ll talk a little bit about why I’ll most likely be initiating a position in CM in the near future.

21 comments:

Traciatim said...

When I opened my first ever brokerage account (through ShareOwner Investments) the only stock I've ever traded was to but 1 share of CIBC, back when it was above 90. I just wanted to see the process.

Then I ended up buying a house, my significant other decided to start a business, and life happened. Now I think it's time to get back to the account and start my journey. I was thinking of buying a few more CIBC shares now that it's this low. . . . it's a big bank,it can't go down forever. (Famous last words of the novice investor.)

Philip B said...

I currently DRIP CIBC shares and am buying shares like crazy. I have heard all the arguments against CIBC and they have validity. But in the long term CIBC will continue to increase their dividends and I will be pleased that I was able to pick up the stock at a P/E of 8.

Thicken My Wallet said...

I am not a fan of CIBC. Their history of scandal goes way back before Enron. More importantly, if you speak to people on the street, it is not seen as a great institution to bank at and they are losing customers to their rivals.

If you really like it, wait until you know what will happen to their insurer on all that corporate paper they have.

Middle Class Millionaire said...

thicken,

I agree with you that they aren't a great bank but they are still making a lot of money and are just so cheap relative to the other banks. I wasn't aware that they had any issues with customer service. Thanks.

TKO from Ontario said...

Recently CIBC has come up on my radar screen. I became really curious if the bank was a diamond in the rough or the Typhoid Mary of Canadian banking. In order to get to know the business I decided to take advantage of their $250 Cash offer for opening a CIBC Unlimited Chequing Account and Regular Investment Plan, I saw this advertised on Redflagdeal.com

My experience was hugely disappointing, from first point of contact at the branch to crappy service from their Mutual Funds platform on the web. CIBC breeds a culture of gross incompetence from the top down. Customer service wise CIBC is the Bell Canada of Banking.

From investment stand point they're too much of a gamble for me to take. Although the P/E may look attractive, greed from management and shareholder will be their down fall. IMHO, CIBC is the Britney Spears of Canadian Banking. Going forth I wouln't touch either with a ten foot pole.

Anonymous said...

CIBC investors should demand that top executives are "fired". They got their positions after CIBC took hit on ENRON. This debacle could see bigger loss than ENRON. At least Royal Bank CEO admitted they "misunderstood the risk" or translated into Canadian, "we got greedy". Where are all our bank economists, who just a few weeks ago, said US sub-prime meltdown would not have affect in Canada.

CIBC PCF bank robs singer of everthing, home and all family owns.. said...

Hideous CIBC / PCF bank stole our Brampton, Ontario home and all our home contents including passports, birth certificates to our clothing, child's belongings, toys, collection and everything one would have in one's home. CIBC used a ghost lawyer. Lawyer with same name now denies any part of CIBC's fraud on family--CIBC defrauded my family by lying on affidavits. Our family did not know there was a court date...CIBC's storage company AMJ CAMPBELL VANLINES, KMS ROYAL VANLINES (Ontario, Canada) does not care that they and CIBC stole everything from our home and left us poor and homeless JULY 2007 --we are fighting back and need help. http://www.youtube.com/watch?v=s2XEM8xisCI
CIBC's action has lead to our family being hurt badly...when the news comes out, this will cost CIBC dearly. How can a bank be allowed to do this. Our very sick mother is turning 80 today July 6 2008 and we cannot visit her because CIBC stole our passports and all our documents including our money to our inheritance, savings, paperwork and stocks. ALL TAKEN FROM OUR HOME WITHOUT US BEING INFORMED!

Jackline said...

Hi Nice Blog .I think HR understands the importance of other people tracking time--IT, Lawyers, non-exempt employees, but struggles with the idea of employee time attendance.

Angela said...

URGENT PLEASE SIGN petition fighting CIBC FRAUD. Please pass the word out. Thank you. http://www.thepetitionsite.com/1/family-wants-justice----cibc-stage-managed-fraud ,

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QUALITY STOCKS UNDER 5 DOLLARS said...

Most banks will screw op sooner or later. Thats just the nature of banks.

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