Standard & Poor’s Ratings Services has revised its outlook CIBC and selected subsidiaries to stable from negative. At the same time, the rating agency affirmed all ratings on CIBC and its subsidiaries.

“The ratings on CIBC reflect the bank’s strengthened franchise, improved operating performance, lower risk profile, and lower cost base,” said Standard & Poor’s credit analyst Lidia Parfeniuk. “Offsetting these are still high consumer (unsecured) loan losses and challenged retail revenue growth and market share,” Parfeniuk added.

S&P noted that CIBC’s management has successfully carried out its internal restructuring and cost reduction plans while continuing efforts to reduce the credit risk profile. Standard & Poor’s expects short-term revenue and profitability to continue to improve from the 2006 level but at a modest pace, reflecting a lower risk institution but more focus on revenue growth initiatives.

“Despite some challenges, we believe that CIBC is well-positioned to meet its medium-term objectives,” it said. “More important, we will be looking for the long-term core revenue growth trend to remain intact as the recent huge cost cuts might have compromised revenues.”

S&P noted that CIBC’s credit risk profile is more conservative today, supported by a predominantly Canadian and stable C&I loan portfolio, while exposure to the U.S. wholesale market is managed more prudently with lower hold limits. The more conservative credit profile is also supported by the lower risk consumer (unsecured) lending portfolio, “although further improvements are needed to get loan loss levels to industry levels”, it added.

“This effectively places CIBC in a stronger position to better manage a softer credit environment,” S&P said. “Provisions rose in first-quarter 2007 after several quarters of declines. The quarter reflected new impaired loan formations in the credit card portfolio and, as the bank projected, lower recoveries and reversals in the small business and agriculture portfolio; nevertheless, CIBC’s credit quality is expected to remain fairly strong.”

“CIBC’s capitalization is at the strong peer group level. Also, CIBC’s lower risk culture is contributing to the improved capital position,” it said. “Some pressure exists on capital following the additional ownership in FirstCaribbean International Bank Ltd.”

Finally, Standard & Poor’s indicated that its stable outlook is predicated on CIBC’s improving short-term operating earnings performance and lower risk consumer loan portfolio. Although the hefty cost-cutting initiatives have not put undue pressure on short-term revenue growth, medium-term concerns remain.