Third-quarter profit at CIBC improved considerably year-over-year, but still fell short of analysts’ estimates.



The bank said Wednesday that net earnings for the quarter ended July 31 were $434 million for the quarter ended July 31, up sharply from profits of $71 million booked during the corresponding quarter of 2008.



Cash-diluted earnings per share were $1.04, with adjusted earnings totalling $1.36 per share. The adjusted earnings figure, which excludes one-time items, fell short of forecasts from Thomson Reuters, which predicted earnings of $1.39 per share.



The bank lost $51 million in the previous quarter of 2009. 


Revenue was $2.8 billion for the third quarter, up from $1.9 billion during the same quarter last year.

“CIBC’s core business performance this quarter was solid, given the prevailing economic environment and our cautious risk approach,” said CIBC president and CEO Gerald McCaughey, in a conference call on Wednesday. “We showed progress in both our retail and wholesale banking businesses, that we believe are establishing momentum.”


Within the bank’s retail markets group, revenue fell to $2.34 billion from $2.37 billion in the third quarter of 2008. Wealth management revenue declined by $75 million, or 19%, to $318 million.

“Weaker equity markets have resulted in a decline in asset value-based fee income and lower trading commissions,” said David Williamson, senior executive vice-president and CFO at CIBC, speaking in the conference call. 

But revenue from personal banking was higher, rising to $1.52 billion from $1.48 billion last year, thanks to strong volume growth in many products and higher lending spreads.


The bank took a $106 million charge for mark-to-market losses on credit derivatives from its corporate loan-hedging program, as well as $56 million in loan losses.

Loan losses were most pronounced in the retail banking sector. The bank’s retail markets divisions recorded loan losses of $423 million, while net income totalled $416 million.

Speaking during the conference call on Wednesday, Sonia Baxendale, senior executive vice-president at CIBC, said the loan losses were “well within expectations in the current economic climate.”

“Overall, the portfolio is performing in line with the market reality of higher levels of unemployment,” she said.

But Baxendale noted that credit card delinquencies had improved on both a quarterly and monthly basis during the third quarter.

“Our cautious approach to growth to manage portfolio risk in the current environment has resulted in a stabilized and now improving delinquency trend,” she said. 

The bank said its Tier 1 capital ratio, a key metric measuring the amount of money set in reserve, improved to 12% from 10.5% recorded at the end of fiscal 2008.

“Our capital strength is a clear strategic advantage for CIBC, both dealing with the unknown environment of today, as well as opportunities for the future,” said McCaughey.



CIBC also said it would hold its quarterly dividend steady at 87¢ a share.

In terms of growth opportunities for the bank, McCaughey said CIBC is focusing on strengthening its existing operations before branching into new areas.

“Our first priority is to strengthen our core businesses and to manage down our structured credit exposures, and continue to prudently deploy our capital base, keeping in mind the risk environment that we have out there,” he said. “Our core business, right now, is our area of focus.”

IE