Toronto based, Canadian Imperial Bank of Commerce (NYSE:CM) commonly referred to as CIBC, is one of Canada's chartered banks, fifth largest by deposits. CIBC is primarily focused on the Canadian retail and business banking sectors but does have some exposure outside of Canada.
The bank's two strategic business units, CIBC World Markets and CIBC Retail Markets, have international operations in the U.S., Caribbean, Asia and the U.K. On the international level CIBC serves more than eleven million clients, and has over 40,000 employees. CIBC was named the strongest bank in Canada and North America. In May 2012, CIBC was ranked the 3rd strongest bank in the world, by Bloomberg Markets magazine.
CIBC's Canadian retail and business banking division offers clients across Canada with financial advice, products and services through a network of advisors and greater than 1,100 branches, as well as its ABMs, mobile sales force, telephone banking, online and mobile banking.
CIBC's retail and business banking strategy has shifted to a strategy focused around their clients with the objective of accelerating profitable revenue growth and enhancing the client experience. The retail and business strategy is expected to benefit by deepening relationships with their clients, improving their sales and service capabilities and through the acquisition and retention of new clients.
CIBC's recently announced CIBC Tim Hortons Double Double Visa Card program will assist the company in acquiring new clients. For those unfamiliar with the term "double double," it is a standard coffee ordering which is short for two cream and two sugar. The term has become a national symbol for coffee drinkers.
In recent weeks, CIBC and Tim Hortons (THI) have rolled in-store marketing items to draw attention to the new Visa (NYSE:V) card offering. Some locations allow coffee drinkers to register via a mobile computer station to have their application submitted or referred to a local CIBC branch. Ultimately CIBC will gain increased exposure within the hyper competitive Canadian retail banking markets, while attracting and retaining new and existing clients, which is in line with their strategy.
Partnership with Tim Hortons Will Drive Brand Awareness
On July 2nd, CIBC announced the availability of an innovative CIBC Tim Hortons Double Double Visa Card, which combines a no annual fee CIBC Visa credit card with a classic Tim Card. Within the Canadian market this is a bold retail move for CIBC and major success as Tim Hortons is one of the most well known brands in Canada. According to Tim Hortons's website, in 2011, they opened their 4000th store, which generates annual revenue greater than $3.12 billion.
CIBC's David Williamson, Senior Executive Vice-President and Group Head, Retail and Business Banking, CIBC said in a press release:
Our new Double Double card gives clients more choice in the type of rewards they earn, and our partnership with Tim Hortons gives us an opportunity to attract new clients to CIBC who already enjoy Canada's favorite coffee as part of their daily routine.
Cardholders simply press the CIBC Visa button on the front of the Double Double card to pay for their everyday purchases anywhere Visa is accepted. The system automatically deposits 1 per cent of each dollar spent into Tim Cash rewards. Cardholders can then redeem their Tim Cash for their favourite coffee and menu items at Tim Hortons.
Experience in the Retail Food Market
In 1998, CIBC partnered with Loblaws (OTCPK:LBLCF), to create President's Choice Financial. The vision was that self-serve banking; particularly online banking would become a common theme. The model was launched in 28 Ottawa-area stores offering customers no-fee accounts with free access to internet banking, telephone banking and thousands of bank machines across Canada. Fast forward 4 years to 2002, CIBC had managed to grow President's Choice Financial to more than 1 million customers across Canada.
CIBC Highly Profitable and Supporting a Strong Dividend
In February 2014, CIBC posted a net profit of $1.08 billion, or $2.64 a share, from $719 million or $1.88 a share. The Canadian Imperial Bank of Commerce currently provides its shareholders a rock steady dividend, with a yield around 4%, payable on a quarterly basis. This is amongst the highest dividend paid for the top banks in Canada.
Possible USA Growth Through Acquisition?
In 2013, Atlantic Trust a U.S. based private wealth management firm that provides wealth management for high-net-worth clients, was acquired by CIBC. CIBC paid $210 million for Atlantic Trust, which manages approximately $24 billion in assets. The transaction represented CIBC's return to the U.S. market after several past attempts to enter the industry. Unlike the Toronto Dominion Bank (NYSE:TD), CIBC has had very little success outside of Canada.
CIBC is also in the running to acquire Russell Investments, a U.S. based wealth management firm, which would give CIBC greater global exposure while boosting its asset management business.
Outlook: Is $105 Possible?
Mr. Gabriel Dechaine, an analyst with Canaccord, placed a target of CDN$105 on CIBC representing over 10% appreciation in its share price based on current levels. CIBC offers solid earnings, a solid growing dividend and possible further upside in share price. Although CIBC is heavily focused on growing its Canadian domestic retail and business groups, it has demonstrated to the markets that it has the skin to go out and grow through meaningful acquisition. The tipping point for CIBC shares will be the acquisition of a major U.S. investment company which it is working towards, while the company further entrenches itself in the Canadian retail and business markets. CIBC should be included in every long-term investors' portfolio who are looking to grow through share price appreciation and ongoing growing consistent quarterly dividend payments.
Disclosure: The author is long CM. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.