Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the fifth-largest of the Big 6 banks. Shares dropped 3.12% on May 23. The stock has plunged 5.6% over the past week. This dip came after CIBC released its second quarter 2019 results on May 22.
CIBC slashed its earnings forecast for the full year and now projects little-to-no profit growth in 2019. This is due to a still-cool housing market and rising costs in technology investment. CIBC had originally forecast earnings-per-share growth between 5% and 10% in November 2018.
The bank has long been a leader in mortgage loan growth, and saw results slow in recent quarters. In the second quarter, it reported a 0.9% reversal in residential mortgage lending.
Broader headwinds are a growing concern, not just for CIBC but for all of Canada’s major banks. Investors are beginning to resign themselves to the reality of a prolonged U.S.-China trade war. This will eat into global growth. Canada will feel the pinch, perhaps more so as the closest trading partner of the U.S.
It is difficult to predict whether relief is on the horizon in the housing sector. The industry is pushing hard for a pullback on the mortgage stress test which has frozen out hundreds of thousands of buyers. However, the International Monetary Fund (IMF) has urged Canada to stay the course.
CIBC will experience challenges as the housing market remains weakened. The stock boasts a forward P/E of 8 which makes it an above-average value play relative to its competition. Shares had an RSI of 26 as of close on May 23, which puts it in technically oversold territory. Even still, broader headwinds make CIBC a risky add right now.
