CIBC profit falls but tops forecasts on trading gains, lower loan-loss provisions - The Globe and Mail

Canadian Imperial Bank of Commerce CM-T reported lower first-quarter profit but beat analysts’ estimates as the lender set aside fewer loan loss reserves and benefited from a boost in trading activity.

CIBC earned $432-million or 39 cents per share, in the three months that ended Jan. 31. That compared with $1.9-billion or $2.01 per share, in the same quarter last year.

Adjusted to exclude certain items, including a provision for a lawsuit with a New York hedge fund, the bank said it earned $1.94 per share. That beat the $1.73 per share analysts expected, according to Refinitiv.

The bank kept its quarterly dividend unchanged at 85 cents per share.

CIBC is the first major Canadian bank to report earnings for the fiscal first quarter. The rest of the Big Six banks release financial results next week.

In the quarter, CIBC set aside $295-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was lower than analysts anticipated and included $36-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, CIBC had recorded $75-million in provisions.

Total revenue rose 8 per cent in the quarter, to $5.9-billion. But expenses ticked higher to $4.5-billion, which the bank said was driven by higher compensation for staff and strategic investments.

“We have clear momentum in attracting and deepening client relationships, a resilient capital position, and strong risk management and credit quality,” chief executive officer Victor Dodig said in a statement.

Profit from Canadian personal and small business banking was $589-million, down 14 per cent from a year earlier, largely on higher provision for credit losses, as well as expenses related to the bank’s acquisitions of the Costco credit card portfolio in Canada and employee compensation. But loan balances were up 8 per cent year over year.

The Canadian commercial and wealth management division generated $469-million of profit, up a slight 2 per cent as higher revenue and lower expenses were offset by bigger loan loss provisions. Commercial loan balances increased by 14 per cent from a year earlier.

Capital markets posted $612-million of profit, rising 13 per cent as activity in its global markets and direct financial services businesses offset a slower investment banking quarter.

Profit from the bank’s U.S. arm fell to $201-million as the unit set aside more money for potential bad loans.

CIBC took a previously-announced legal provision of $1.17-billion after a U.S. court found the bank liable for losses incurred by a New York hedge fund in debt deals related to the 2008 U.S. housing crisis. Last week, the lender said that it agreed to pay US$770-million Cerberus Capital Management LP, less than the amount it had set aside. CIBC said that the difference will be reflected in the bank’s second-quarter financial results.

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2023-02-24 12:18:44Z
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