Royal Bank of Canada.

Despite the severe economic challenges of the 1980s, Royal Bank entered the 1990s with a stable
financial position and a strong organizational foundation. Opportunities presented by the regulatory
reform in the financial services industry were swiftly taken advantage of, leading to important strategic
acquisitions such as Dominion Securities (1988), Royal Trust, and Voyageur Insurance Company (1993),
which served as the model for our transformation from a local bank to a provider of international
financial services. Royal Bank introduced its global master brand, RBC, in 2001 to further symbolize our
development. (RBC, 2023)

New product opportunities were also made possible by the financial services sector's continued
deregulation. The financial services sector underwent enormous changes during the course of the next
two decades, as well as increased competition. With two strategically aligned goals in mind—improving
profitability and delivering first-rate customer service. (RBC, 2023)

Canadian Imperial Bank of Commerce

On June 1, 1961, the Canadian Bank of Commerce (founded in 1867) and the Imperial Bank of Canada
(founded in 1875) merged to form the Canadian Imperial Bank of Commerce (CIBC), which was the
largest merger of two chartered banks in Canadian history. Our bank has a long history of fostering
growth and prosperity for individuals, organizations, and communities both domestically and abroad.
(CIBC, 2023)

Royal Bank of Canada Canadian Imperial Bank Industry

(RBC) of Commerce (CIBC)
Forward P/E ratio 10.87 8.20 9.48
Forward annual 4.15 6.00
Dividend Yield
Operating Margin 40.08% 39.01%

C) Royal Bank of Canada

Forward P/E Ratio (Price/Earnings Ratio): The 10.87 forward P/E ratio reflects market estimates for future
earnings growth for RBC. A P/E ratio of 10.87 indicates that shareholders are prepared to fork up around
10.87 times the company's anticipated yearly profits per share. A lower P/E ratio typically indicates that
the stock is cheap or that growth prospects are lower for the company. To better comprehend RBC's
valuation, it is crucial to contrast the P/E ratio with competitors in the same industry and previous levels.
Forward Annual Dividend Yield: The dividends paid by RBC as a percentage of its stock price are
represented by a forward annual dividend yield of 4.15%. A dividend yield of 4.15% means that an
investor may anticipate an annual return from dividends of around 4.15% depending on the current
stock price. Income-seeking investors sometimes find greater dividend yields to be appealing since it
shows the firm is paying out dividends on a sizable amount of its revenues.

Operating Margin: RBC generates profits from its main business activities with an efficiency of 40.08%, as
shown by its operating margin. It indicates the portion of revenue that is still available after operational
costs have been subtracted. An increase in operating margin is often regarded as a good thing since it
indicates that a business is doing a good job of controlling expenses and turning a profit.

Canadian Imperial Bank of Commerce

The company's forward P/E ratio of 8.20 suggests that the market has relatively lower growth
expectations for CIBC's future earnings. The stock may be considered relatively undervalued compared
to its earnings potential.

The forward annual dividend yield of 6.00% indicates that CIBC offers a competitive dividend payout to
shareholders, making it potentially attractive to income investors seeking steady cash flow.

The operating margin of 39.01% highlights CIBC's efficiency in generating profits from its core banking
operations, showcasing its ability to control costs effectively.

D) Based on various factors, I would invest in RBC. Because it has a higher number of employees 50,000+
(RBC, 2023) than CIBC, which means RBC has more human capital. Also, RBC operates in more locations
than CIBC which gives them a geographic advantage over CIBC. Based on all these factors RBC’s future is
brighter and more stable.
Reference

canadian imperial bank of commerce (n.d.). History. CIBC.com. Retrieved July 21, 2023, from
https://www.cibc.com/en/about-cibc/corporate-profile/history.html

Royal bank of Canada (n.d.). Recent past. Rbc.com. Retrieved July 21, 2023, from
https://www.rbc.com/en/about-us/history/celebrating-our-history/our-recent-past/