Canadian Imperial Bank of Commerce (NYSE:CIBC) is about to release earnings. Ponder this Bear Case Scenario:
CIBC suffered a strategic defeat when it lost the Aeroplan loyalty program. Many of those receivables will now be carried by competing banks. They will also move quickly to exploit the inroad and increase relationships and draw more business away from CIBC. CIBC is launching a competing offering. however they are behind and have to spend serious capital just to catch up. Bad news to follow.
American analysts continue to be fixated about the Canadian Housing bubble. This drives away American investors who may wish to increase their exposure. As interest rates rise many mortgages underwritten at historically low rates will be under water.
In general low-interest rates mean small margins and increased competition for quality business. CIBC needs to fight off the competition and attract new business. It does not have a demonstrable model to do that.
George Gutowski writes from a caveat emptor perspective.