CIBC announced Monday that it has reached an agreement with the Canada Customs and Revenue Agency resulting in an income tax recovery of approximately $689 million in 2003.

The agreement covers 1996 to 2000, and is mainly related to foreign-based transactions that occurred during and after 1999.

“CCRA has now determined that a portion of the earnings in question are not subject to Canadian income tax,” the bank said.

CIBC said the agreement will give its third quarter net earnings will get a boost of $395 million due partly to a big tax recovery from the federal government.

The gain will add $1.09 a share to the bank’s earnings.

CIBC said the proceeds from the tax reassessment will be used to improve its capital position. The bank plans to speed up its previously announced sale of non-core corporate loan.

As part of the plan, CIBC said it will report a loss on the future sale of corporate loans of approximately $150 million. The bank also said it take a reduction on the value of its U.S. future income tax asset of approximately $225 million.