CIBC May Have C$211 Million Debt Writedown in Third Quarter, Mihelic Says

Canadian Imperial Bank of Commerce, the country’s fifth-largest lender, may take a C$211 million ($202 million) debt writedown that would lower third-quarter profit, according to Cormark Securities Inc. analyst Darko Mihelic.

The writedown is equal to 55 cents a share, Mihelic said in a research report today.

Canadian Imperial was the hardest hit among the country’s banks during the financial crisis, recording C$10.9 billion in debt-related writedowns since the collapse of the U.S. subprime market in 2007. The Toronto-based bank has been unwinding the debt-related activities that led to the charges.

Further charges may arise because CIBC may adjust the value of its structured credit run-off business as credit default swaps for financial guarantors tied to the portfolio widened in the third quarter, Mihelic said in a note.

“We believe such a charge is not material, will be ignored by most analysts and likely overshadowed by improved credit metrics,” said Mihelic, who rates CIBC a “buy.”

CIBC may benefit from a decline in loan losses as the Canadian economy strengthens, helping the bank’s credit-card portfolio, Mihelic said.

CIBC’s net income may be more than C$1 a share for the three-month period ending July 31, Mihelic said. Analysts are expecting profit of C$1.56 a share, the average of six estimates in a Bloomberg survey. CIBC is expected to report results Aug. 25.

Bank spokesman Rob McLeod declined to comment on the report.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

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