Despite Subprime Exposure, Blackmont Upgrades CIBC

Canadian Imperial Bank of Commerce (CM) has finally revealed the size of its book of non-subprime collateralized debt obligations that are hedged with monolines, and its a whopping C$25-billion.

That’s bigger than Blackmont Capital analyst Brad Smith had feared, although it is about the same amount that some other analysts had forecast. Nevertheless, Blackmont has upgraded CIBC to “hold” from “sell,” and Mr. Smith has also raised his target price for CIBC stock from C$62.00 to C$74.00

Although the total amount is high, it only includes C$6.5-billion of exposure to the weaker monolines, “which is about C$3-billion lower than expected,” Mr. Smith said in a note.

Despite earning an upgrade from Blackmont, there are still some concerns about CIBC.

The bank has taken C$4.2-billion in credit crunch writedowns, the most of any Canadian bank, and was forced to raise C$2.9-billion of emergency capital funding in January to help steady its balance sheet. The risk of additional losses “remains elevated,” and that could lead to more new equity issues from CIBC, Mr. Smith said.