Moody’s Investors Service commented today on the announcement by the CIBC that it will issue between $2.75 billion and $2.94 billion in common equity.

Moody’s says CIBC is rated B- for bank financial strength, Aa2 for long-term deposits, and P-1 for short-term obligations. The rating outlook remains negative.

Moody’s lead analyst and senior credit officer, Peter Routledge, stated that “CIBC’s rating outlook remains negative because of Moody’s concern that remedies to the bank’s weaknesses in risk management decision-making have yet to be demonstrably implemented. While this equity issuance will materially improve CIBC’s capital ratios and provide a cushion against unforeseen future losses, this action must be evaluated within the broader context of improvements to CIBC’s strategic risk management practices.” He noted that “CIBC has announced important changes to its senior management team and board of directors, and it will be important to understand fully the impact of those changes on the bank’s risk management discipline order to put the impact of the common equity issuance in its proper context.”

The loss triggered by CIBC’s trading portfolio of Collateralized Debt Obligations (CDOs) is the latest in a series of major losses that have pressured CIBC’s ratings over the past five years.

However, Moody’s noted that the bank’s largest financial guarantor exposure of $3.5 billion is to a counterparty in financial distress. This exposure will cause CIBC to record an estimated $2 billion pre-tax loss (an estimated $1.3 billion after-tax) in the first quarter of 2008.

Moody’s also highlighted CIBC’s strong credit metrics, including excellent risk-adjusted profitability and sound asset quality. CIBC is near the top of its North American peer group on these rating factors. Moreover, CIBC’s Tier 1 capital ratio will exceed 10% after the equity issue and CDO write-downs, well above the regulatory minimum of 7%.

“This performance is a product of management’s success in shifting the banks’ business mix away from a market with poor risk-return characteristics — U.S. corporate lending — and towards markets with stronger risk-return characteristics — Canadian personal, commercial, and wholesale banking,” Moody’s stated.