CIBC Earnings: Capital Markets Segment Performance Lagged Peers

Key Morningstar Metrics for Canadian Imperial Bank of Commerce

• Fair Value Estimate
  : C$135.00
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Low

What We Thought of Canadian Imperial Bank of Commerce’s Earnings

Canadian Imperial Bank of Commerce CM reported OK third-quarter results, with adjusted EPS of C$2.73, up 26% year over year. Shares fell approximately 3%-4% intraday Aug. 27 following the bank’s earnings release.

Why it matters: Capital markets segment earnings declined by 9% sequentially, worse than its larger Canadian peers, all of which saw growth during the quarter. While the third quarter is usually seasonally weaker for trading, high-profile US IPO filings and artificial intelligence-related trade were both strong drivers of higher equity trading volume in the industry during the quarter.

• Within the segment, CIBC’s global markets revenue declined by 5% sequentially despite having around 47% exposure to equities trading.

The bottom line: Even with the weaker news on the capital markets front, we expect to increase our fair value estimate for narrow-moat CIBC by around a high-single-digit percentage. We continue to view shares as being overvalued.

• The valuation increase will be primarily driven by higher forecasts for net interest income and higher expectations for wealth management and capital markets fee income, partially offset by higher compensation cost assumptions.

Between the lines: CIBC’s management did not give clear credit guidance for the final quarter of fiscal 2026. Prior guidance had called for the bank’s loan loss ratio in the second half of fiscal 2026 to be in line with 36 basis points seen during the first half of the year.

• The bank’s third-quarter loan loss ratio was 0.4%, implying an 8-basis-point sequential improvement will be needed in the fourth quarter to hit the previous guidance.
• That said, the third quarter’s sequentially higher impaired loan provisioning ratio was mostly driven by the Canadian commercial banking and capital markets segments, which the bank called idiosyncratic. Generally, these segments’ credit results are more lumpy.