(December 2 – 18:00 ET) –
Following the release of CIBC’s
earnings and revenue figures for
1999, bank executives held a
conference call with analysts and
investors.
CIBC chair and CEO John Hunkin,
described the bank’s results as
“reasonably good,” although he
noted there is some “serious work”
to do before the bank reaches its
18% return on equity target.
In the current period, ROE came
in at about 12.7%. Hunkin stressed
that the bank does not intend to
improve that result by simply
shedding capital. It intends to
maintain capital ratios between
7.5% and 8.5%, and generally more
than 8%.
The bank is still focused on
cost-cutting. It is sticking to
its promise to cut $500 million
in annual expenses. Hunkin said
the cuts will come at head office,
on the retail banking side in
Canada, and in the World Markets
investment banking division
outside Canada. The bank expects
to lose just $60 million to $65
million in revenue through those
cost cuts.
Hunkin called personnel cuts
inevitable. He likened the Canadian
banks to now-obsolete retailer
Eaton’s. “Our only security
is efficiency and growing our
profitability,” he said. Job
losses are an inexorable part of
that process. “If there is another
solution it is not evident,”
Hunkin maintained.
The bank’s electronic banking
initiatives are one key growth
area. It currently offers its
“bank-in-a-box” product through
President’s Choice Financial,
and Winn-Dixie stores in the
U.S. Hunkin reported that PC
Financial has signed up 180,000
customers to date, 150,000 of them
are using the service at least once
a month. CIBC projects that each of
these customers becomes profitable
after the second year with the
service, so the business itself at
present growth rates should become
profitable at the end of its third
year.
According to Hunkin, PC
Financial received the highest
service rating of any bank in
Canada in a recent independent
survey. He said that product
roll-outs should be faster in the
U.S. than they have been in
Canada. CIBC is looking to expand
its offering of this service in
the U.S., and expects to have at
least one, possibly two, more
partners in place by this time
next year.
The bank says it will spend $100
million next year to expand its
electronic banking offerings. Those
costs will be financed by general
earnings and real estate sales.
-IE Staff
For more information, please see: