CIBC today posted a 26% increase in third-quarter earnings, despite a previously announced $290 million write-down tied to the U.S. residential mortgage market.

The bank said it earned $835 million, or $2.31 a diluted share, in the three months ended July 31, helped by higher profits in its retail business and by advisory and investment banking activity in its wholesale business.

That compared with a profit of $662 million, or $1.86 a share, a year earlier.

The bank also raised its quarterly dividend by 13% to 87¢ a share.

CIBC said its earnings were boosted by a reversal of litigation accruals, the changing value of credit derivatives, and a tax recovery, which together added 50¢ a share to earnings. Merchant banking gains were also higher than normal, the bank said.

A mortgage debt-related write-down of $290 million, or $190 million after tax, decreased earnings by 56¢ a share, while a premium paid to redeem preferred shares lowered earnings by 5¢ a share.

CIBC said its exposure to the U.S. mortgage market was about US$1.7 billion at July 31, and the bank said less that 60% of this was tied to sub-prime mortgages.

Net income at CIBC World Markets, the wholesale and corporate banking unit, increased 37% to $261 million on higher investment banking and merchant banking revenue, lower expenses and a higher tax benefit.

Third-quarter net income at CIBC Retail Markets rose 14% to $555 million, on volume growth and higher revenue from the acquisition of FirstCaribbean International Bank.