Executive Summary / Key Takeaways

• Canadian Imperial Bank of Commerce (CM) is executing a client-focused, relationship-based strategy, bolstered by significant digital and AI investments, which is driving consistent financial outperformance and robust profitability.
• The bank reported strong Q3 2025 results, with net income up 11% to $2.1 billion and earnings per share increasing 12% to $2.16, alongside a 14.2% adjusted Return on Equity (ROE), marking its fifth consecutive quarter of year-over-year ROE improvement.
• CIBC's proprietary AI platform (CAI) and AI-powered voice assistant represent key technological differentiators, delivering quantifiable operational efficiencies, including an estimated 600,000 hours saved, and enhancing client experience.
• Despite macroeconomic uncertainties and global trade tensions, CIBC maintains strong credit quality, with impaired loss ratios at the lower end of guidance, and a robust capital position (13.4% CET1 ratio), providing flexibility for organic growth and shareholder capital returns.
• The bank anticipates gradually higher net interest margins, continued positive operating leverage, and sustained ROE expansion beyond its 15% target, underpinned by its diversified North American platform and strategic execution under new leadership.

The Foundation of a Client-Centric Bank

Canadian Imperial Bank of Commerce (CM) operates as a diversified financial institution, serving personal, business, public sector, and institutional clients across Canada, the United States, and internationally. The bank's overarching strategy, refined over the past decade, centers on a client-focused, relationship-based model, prioritizing digital-first capabilities and a highly connected platform. This strategic pivot, initiated under outgoing CEO Victor Dodig and set to continue under incoming CEO Harry Culham, has fundamentally reshaped CIBC's market positioning within a competitive North American banking landscape.

In an industry dominated by large players like Royal Bank of Canada , Toronto-Dominion Bank , Bank of Montreal , and Bank of Nova Scotia , CIBC differentiates itself through a deliberate focus on deeper client relationships rather than solely competing on price. This approach is particularly evident in its Mass Affluent & Private Wealth franchise and its emphasis on integrated service delivery across its business units. The broader banking industry is currently influenced by declining interest rates, which are expected to support economic growth, and persistent global trade tensions, which introduce a degree of uncertainty.

Technological Edge: AI as a Differentiator

A cornerstone of CIBC's strategic evolution is its commitment to technological differentiation, particularly in artificial intelligence. The bank's proprietary CIBC AI platform, known as CAI, stands out as a core technological advantage. This platform has transformed internal operations, saving an estimated 600,000 hours for CIBC team members across various businesses since its launch. The tangible benefits extend to customer experience, with CIBC's AI-powered voice assistant receiving the 2025 Digital CX Award for Best Use of AI for Customer Experience. Furthermore, the CAI platform was recognized with the Best Gen-AI Initiative Award for the second consecutive year, underscoring its continuous innovation.

CIBC's proactive stance on AI is also reflected in its governance, becoming the first major Canadian bank to sign the Government of Canada's Voluntary Code of Conduct for generative artificial intelligence. For investors, this technological leadership translates into a stronger competitive moat, driving operational efficiencies, enhancing client satisfaction (evidenced by the highest ranking in customer satisfaction for Online Banking and Mobile Banking in the latest J.D. Power study), and supporting the bank's long-term growth strategy by enabling scalable advice, sales, and engagement. These advancements are foundational to CIBC's ability to compete effectively against rivals who may have larger scale but potentially less integrated or less mature AI capabilities.

A Decade of Strategic Transformation

CIBC's journey over the past decade has been marked by a deliberate transformation, moving from a more generalized approach to a highly focused, relationship-driven model. This historical context is crucial for understanding its current strengths. Key milestones include strategic U.S. expansion, notably the acquisition of The PrivateBank, which has played a pivotal role in building its U.S. Commercial Banking and Wealth Management franchise. In Canada, the Imperial Service platform has become a core driver of its Mass Affluent strategy, consistently achieving high Net Promoter Scores. The bank's sustained investment in digital capabilities has also yielded results, with digital registration surpassing 10 million clients, encompassing 81% of its eligible client base.

The recent leadership transition, with Victor Dodig concluding his 11-year tenure as CEO and Harry Culham assuming the role on November 1, 2025, signals a continuation and acceleration of this established strategy. This continuity is expected to provide stability and further drive the execution of CIBC's client-focused initiatives.

Segmental Strength: Pillars of Profitable Growth

CIBC's diversified business model is built upon several key segments, each contributing to its overall performance and strategic objectives.

Canadian Personal and Business Banking

This segment is central to CIBC's relationship-based strategy, focusing on mass affluent clients and delivering modern, digital-first banking experiences. In Q3 2025, the segment reported a robust 17% increase in adjusted net income and an 18% rise in pre-provision pre-tax earnings, with revenues up 10%. The net interest margin (NIM) in this segment reached 281 basis points, expanding by 27 basis points year-over-year and 11 basis points sequentially. This margin expansion is attributed to deposit margin growth, higher rates, and a favorable business mix. Operational details highlight the success of this strategy: 93% of clients hold multiple products with CIBC, and nearly 80% of mortgage clients also have a checking account, both all-time highs. The mortgage portfolio margin has improved by approximately 20% year-over-year, as the bank prioritizes advice and relationships over price competition. Recent product launches, such as the CIBC Education Portfolios, a specialized Business Banking program for skilled trades, and the tiered CIBC Smart Account, further underscore its commitment to tailored client solutions.

Canadian Commercial Banking and Wealth Management

This segment demonstrates strong connectivity and industry specialization. In Q3 2025, net income and pre-provision pre-tax earnings surged by 19% and 16% year-over-year, respectively, with overall revenues increasing 13%. Wealth Management revenue grew 15%, driven by higher fee-based assets, market appreciation, and net sales, while Commercial Banking revenues were up 10% due to volume growth and margin expansion. Commercial loan and deposit volumes increased by 10% and 8% respectively, with over 43% of this growth originating from new clients. CIBC Asset Management ranked second among the big six banks in retail mutual fund long-term net sales in Q3 2025.

U.S. Commercial Banking and Wealth Management

CIBC's U.S. operations are strategically focused on expanding private wealth management and growing commercial banking through industry expertise. The segment's net income rose 15% in Q3 2025, supported by a 7% increase in pre-provision pre-tax earnings and 8% revenue growth. Deposit growth was strong at 13%, and loan growth reached 3%, contributing to a 14% higher net interest income. The NIM in this segment was 378 basis points, up 6 basis points sequentially. While the bank is strategically deemphasizing certain institutional commercial real estate elements, its C&I loan growth has been robust at approximately 7% year-over-year. Cross-business referral volumes in the U.S. are performing well above targets, up 25% on an annualized year-to-date basis.

Capital Markets

The Capital Markets segment leverages a highly connected and diversified North American platform. In Q3 2025, net income soared 43% year-over-year, with revenues up 24%. Global Markets revenues increased 18%, and Investment Banking achieved record revenues driven by higher underwriting and advisory activity. The U.S. region's revenue growth was particularly strong at 32% year-over-year, contributing 34% of total segment revenues. CIBC Capital Markets holds a leading market share position with its strategic clients year-to-date.

Financial Performance and Robust Health

CIBC's financial performance reflects the successful execution of its strategy. In Q3 2025, the bank delivered adjusted net income of $2.1 billion, an 11% increase from the prior year, and adjusted earnings per share of $2.16, up 12%. Pre-provision pre-tax earnings also grew by 12%, marking the eighth consecutive quarter of positive operating leverage. The adjusted ROE reached 14.2%, a 20 basis point improvement year-over-year and the fifth consecutive quarter of such improvement. Year-to-date, the adjusted ROE stands at 14.6%.

Net interest income, excluding trading, increased 13% in Q3 2025, driven by balance sheet growth and expanding margins. The all-bank margin (excluding trading) rose 10 basis points year-over-year and 6 basis points sequentially. Non-interest income was $3.2 billion, up 4%, with market-related fees, particularly underwriting, advisory, and mutual fund fees, increasing 10%. Expenses, excluding performance-based compensation, grew 4% in Q3 2025.

The bank maintains a robust capital position, with a CET1 ratio of 13.4% at the end of Q3 2025, stable quarter-over-quarter. This excess capital provides flexibility for growth and shareholder returns. CIBC repurchased 5.5 million common shares during the quarter and announced its intention to launch another normal course issuer bid for 2% of its outstanding common shares. In Q3 2025, $1.4 billion in capital was returned to shareholders, including over $500 million in share repurchases. Liquidity remains very strong, with an average LCR of 127%.

Credit Quality and Prudent Risk Management

CIBC's credit portfolios have demonstrated resilience, performing at the favorable end of guidance despite the evolving macroeconomic backdrop. The total provision for credit losses (PCL) in Q3 2025 was $559 million, a decrease from $605 million in the prior quarter. The allowance for credit losses increased by 1 basis point quarter-over-quarter to 78 basis points, with the total allowance up 12% year-to-date.

The performing provision was $78 million in Q3 2025, reflecting a prudent weighting to downside scenarios, including potential USMCA renegotiations. The provision on impaired loans was $481 million, with the impaired provisions ratio at 33 basis points. While Capital Markets impaired PCL increased due to "one name," no systemic risk was identified in specific sectors. The gross impaired loan ratio was 56 basis points, and for mortgages, current loan-to-value (LTV) for the book is 54%, with impaired balances at 63% LTV, leading to an expectation of no material increase in losses. The personal banking book continues to show resilience, with net write-off ratios remaining flat and 90-plus day delinquencies for credit cards and personal lending trending lower.

Competitive Positioning and Strategic Outlook

CIBC operates in a highly competitive banking sector, where its client-focused strategy and technological advancements provide distinct advantages. Compared to larger rivals like Royal Bank of Canada (RY), CIBC's specialized focus on certain client segments, such as public sector and institutional clients, offers a unique value proposition. Against Toronto-Dominion Bank (TD), CIBC's integrated services and digital tools, particularly its AI platform, enhance efficiency in client onboarding. In capital markets, CIBC's broader international scope provides an edge over Bank of Montreal (BMO)'s more retail-oriented strategy. Furthermore, CIBC's emphasis on North American stability and public sector services contrasts with Bank of Nova Scotia (BNS)'s broader international exposure.

While CIBC's P/E ratio of 12.91 and P/B ratio of 1.68 are higher than some competitors (e.g., RY P/E 4.58, P/B 2.26; TD P/E 3.91, P/B 1.69; BMO P/E 3.97, P/B 1.56; BNS P/E 3.33, P/B 1.35), this valuation may reflect market confidence in its growth strategy and the effectiveness of its client-centric model. The bank acknowledges potential vulnerabilities, such as an over-reliance on Canadian markets, but actively mitigates this through its growing U.S. presence and diversified platform.

Looking ahead, CIBC's outlook is optimistic. Management expects margins in both Canada and the United States to move "gradually higher" based on the current forward curve. Canadian Personal and Business Banking margins are anticipated to "trend higher" by "a few basis points a quarter". The U.S. segment's NIM is expected to normalize to the 365 to 370 basis point range. The bank targets positive operating leverage on a full-year basis and aims to manage expense growth to the mid-single digits for the balance of fiscal 2025. Loan growth in U.S. Commercial Banking and Wealth Management is projected at "low to mid-single digits," while Canadian Commercial Banking expects "mid-single digits growth" for the remainder of the year. Impaired PCLs are guided to be in the "mid-30 basis point range" for fiscal 2025, with expectations to trend towards the lower end as macroeconomic uncertainties subside. The medium-term ROE target of 15% plus remains firm, with management expressing strong conviction in achieving and exceeding this target through continued strategic execution.

Conclusion

CIBC's strategic transformation, centered on a client-focused, relationship-based model and robust digital innovation, is clearly yielding tangible financial results. The bank's consistent performance, marked by strong earnings growth, expanding margins, and improving ROE, underscores the effectiveness of its approach. Its differentiated technological capabilities, particularly the CIBC AI platform, are not merely operational enhancements but fundamental drivers of efficiency and client satisfaction, solidifying its competitive standing.

Despite a dynamic macroeconomic environment characterized by global trade tensions and interest rate shifts, CIBC's prudent risk management and strong capital position provide a resilient foundation. The bank's clear outlook, supported by specific guidance on margins, operating leverage, and credit quality, reinforces the investment thesis. As CIBC transitions leadership and continues to execute its strategy, its commitment to deep client relationships and technological leadership positions it for sustained profitable growth and continued value creation for its stakeholders.