CIBC Stock Split | When Will Canadian Imperial Bank Shares Rise Enough to Split Next? (2024)

Even though the latest Canadian Imperial Bank of Commerce (CM) stock split was immediately followed by a rally in the share price, buying interest appears to have faded since the year’s second semester started, as indicated by the stock’s negative performance during this period.

Since 1 June, the CIBC stock price has seen losses of 12.2%. Yearly losses currently (16 September) stand at 20.7%. A challenging macro backdrop has seen the adoption of hawkish measures by the world’s top central banks, depressing the value of equity instruments.

Can another stock split push the CIBC stock price higher? How high must the stock go for the bank to approve another split? In this article, we analyse the latest developments and discuss the likelihood of another CIBC bank stock split.

What is a stock split?

A stock split occurs when a corporation issues a stock dividend or approves the creation of a certain number of new stocks that will be distributed to the firm’s current shareholders in proportion to the number of shares they own.

Once the operation has completed, the value of the stock typically declines as the number of shares in circulation increases while the company’s equity remains unchanged. In a stock split, existing shareholders are not diluted as their percentage of ownership over the company does not change.

The CIBC has performed four stock splits. The latest of these CIBC stock splits occurred on May 13 2022, when the board of directors approved a two-for-one split.

According to the company’s official announcement, shareholders of record by 6 May 2022 were entitled to receive one additional common share for every CIBC stock held. As a result, the total number of shares in circulation increased from 451.29 million to 902.58 million.

The stock’s post-split price, as listed on both the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE), was effectively halved after the split was completed on 13 May.

Stock splits are typically performed to increase the liquidity of the equity instrument by lowering its price. In the past, their purpose was to make the security more accessible to retail investors with low investment budgets, meaning they could only invest in low-priced stocks to build a diversified portfolio.

However, the introduction of innovative financial products such as contracts for difference (CFDs) and fractional shares have made it easier for investors with relatively small budgets to buy shares.

Additionally, some investment funds may be restricted to certain shares whose price is lower or higher than a certain threshold. In some cases, attracting capital from those funds may also be a reason for a stock split.

What is CIBC?

CIBC is one of Canada’s largest financial institutions. The bank had total assets of CAD896.8bn ($675.5bn) and deposits of CAD678.5bn by the end of the third quarter of fiscal year 2022 and primarily catered to US and Canadian customers.

The CIBC was formed as a result of a merger between the Canadian Bank of Commerce and the Imperial Bank of Canada in 1961.

This financial institution provides a wide range of products and services and its operations are divided into four relevant segments:

• Canadian personal and business banking

• Canadian commercial banking and wealth management

• US commercial banking and wealth management

• Capital markets

Since 2014, Victor G. Dodig has been the bank’s CEO. The firm employs 49,500 people and serves over 13 million customers.

Over the past 10 years, the value of CIBC stock has risen by 165.6% at a compounded annual growth rate of 10.3%. During that same period, the US S&P 500 (US500) and Dow Jones Industrial Average (US30) stock indices have produced total gains of 169.2% and 129.2%, respectively. Canada S&P/TSX Toronto Stock Market Index has produced total gains of 59.9% during that same period.

History of CIBC Stock Splits

According to CIBC’s investor website, the company’s stock has been split on four occasions. Here are the dates and details of the CIBC share split history:

Since the 1997 stock split, the price of CIBC shares has risen by 301.6%. This positive performance is not necessarily related to the board’s decision to split the stock as this transaction has no material effect on the fundamentals of the underlying business.

When will CIBC split its stock again?

The board of directors has not indicated whether another CIBC stock split will happen again any time soon. The latest split occurred a few months ago, and 25 years had passed since the company performed its previous split.

Will the CIBC stock split boost its share price?

Stock splits have no impact on a company’s fundamentals such as the performance of its business or the healthiness of its balance sheet. They also don’t provide any additional capital to the firm and do not result in gains for investors.

However, certain studies have pointed out that stock splits could lead to short-lived rallies in the price of the equity instrument as retail investors appear to be drawn to these events and may consider them a suitable opportunity to speculate on the share price.

It is worth noting that the CM price increased for three days in a row after the latest Canadian Bank stock split. However, the stock has performed poorly since the year started, months after the split occurred.

Stock splits are often considered an indication that a company is doing well. This is because the value of an equity instrument rises if its issuer’s earnings and cash-flow generation capacity improves over time.

If that is the case for many years, the share value of the corporation should progressively increase to the point that a stock split can be considered appropriate. Hence, stock splits may be performed after a publicly traded business has done well for several years in a row.

CIBC analysts’ sentiments

As of 16 September, data from TipRanks showed the consensus recommendation for CM was a ‘strong buy’ from six of eight analysts, the remaining two rated it a ‘hold’. The average price target for CIBC stock stood at CAD77 a share, with the highest estimate at CAD84 and the lowest at CAD69.

Wallet Investor predicted CIBC stock price could end the year at CAD68.58, and rise further to CAD82.69 by December 2023. The algorithm forecaster further projected the close price could be CAD97.064 in 2024 and CAD111.33 in 2025.

On 26 May, analyst Eric Compton from Morningstar wrote:

“Despite having one of the larger domestic branch networks, CIBC’s products haven’t typically had top share in Canada, though the bank had made significant strides in multiple categories for years starting in 2011, as the bank increased share in multiple categories and increased product numbers per customer”.

“This improvement has admittedly slowed down recently, although the bank took some incremental share again in 2021. Overall, we believe CIBC has improved its core operating performance over the years, and while the improvement has slowed and the bank's expense base is rising as CIBC continues to invest in technology and other aspects of the franchise, we still see the bank making incremental improvements over the medium term”.

Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading. And never invest or trade money you cannot afford to lose.

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