Feds to consider expanded services from banks, fintechs

The Canadian Imperial Bank of Commerce’s (CIBC) 25% rise in fourth-quarter profits was helped by better-than-expected performance in the U.S., while rival Toronto-Dominion Bank’s (TD) double-digit profit lift fell short of market expectations amidst a retracement in its earnings south of the border.

Toronto-based CIBC, Canada’s fifth-largest lender, reported net income of $1.16 billion in the three months ended Oct. 31, up from $931 million during the same time in 2016. On an adjusted basis, CIBC’s profit amounted to $2.81 per share, up 8% from the fourth quarter of 2016 and beating the $2.59 in adjusted earnings per share expected by analysts surveyed by Thomson Reuters.

The major contributor to CIBC’s earnings continued to be its Canadian personal and small business banking division, which earned an adjusted quarterly profit of $623 million, up 11.3% from a year earlier.

But it was CIBC’s U.S. commercial banking and wealth management unit that saw a major bump in profit, with net income for the quarter of $107 million — more than four times the $23 million reported during the same quarter a year earlier.

That reflected a full quarter of “strong performance” from The PrivateBank, after CIBC purchased its parent PrivateBancorp for roughly US$5 billion in June and rebranded it in September as CIBC Bank USA.

“U.S. commercial banking and wealth management continue to exceed our expectations … The former PrivateBank showed one of its best quarters ever,” CIBC president and chief executive Victor Dodig told analysts on a conference call Thursday.

That purchase, along with the acquisition of private wealth management firm Geneva Advisors also headquartered in Chicago, was part of CIBC’s strategy to deepen its presence in the U.S. and generate 25% of its profits from south of the border in the medium term.

Meanwhile, its larger rival TD earned $2.71 billion in its latest quarter, up 17.8% from $2.3 billion a year ago, boosted by its Canadian and U.S. retail banking business. Canada’s biggest lender by assets said Thursday the profit amounted to $1.42 per diluted share for the quarter ended Oct. 31, up from $1.20 per diluted share in the same quarter last year.

“Q4 was a great quarter for TD and a strong finish to fiscal 2017,” said TD president and chief executive Bharat Masrani on a call with analysts.

On an adjusted basis, Toronto-based TD said it earned $1.36 per diluted share, compared with $1.22 per diluted share a year ago. Analysts had expected an adjusted profit of $1.39 per diluted share, according to those surveyed by Thomson Reuters.

TD’s U.S. retail business earned $776 million, up 11% in the same quarter last year. However, that was down sequentially 13.9% from the $901 million in the third quarter of this year.

Wholesale banking, which includes TD’s capital markets and investment banking business, earned $231 million in net income, down from $238 million a year ago.

Provisions for credit losses, or money set aside for bad loans, for the quarter rose to $578 million compared with $548 million a year ago.

Shares of TD were down 2.4% on Thursday to close at $73.24 in Toronto, while CIBC shares closed up 3% at $118.14.

Barclays analyst John Aiken said in a research note that CIBC came in “well ahead of expectations on the back of exceptionally strong domestic retail and a better than forecast contribution from its new U.S. platform, including PrivateBank.”

TD, meanwhile, “disappointed on the back of a retracement in earnings in its U.S. retail segment,” he told clients.

“While far from a disaster, we are concerned that, with the strength of TD’s valuation over the past few months, the results (Thursday) could lead to some relative weakness as expectations become reset somewhat heading into 2018,” Aiken said in a separate note.

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