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
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.