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CIBC Seen Posting First Profit Decline Since 2009

Canadian Imperial Bank of Commerce will probably post its first profit decline in more than four years after selling half of a key credit-card business and taking a writedown on its Caribbean banking operations.

Canadian lenders begin releasing second-quarter results this week, with Royal Bank of Canada and Toronto-Dominion Bank (TD) expected by analysts to show the largest profit increase among the country’s six biggest banks when they report tomorrow.

Wealth-management earnings will help fuel profits at the country’s banks in the quarter ended April 30, helping counter a slowing pace of loan growth and slumping revenue from investment banking, analysts including Barclays Plc’s John Aiken said. The six-biggest lenders will post an “unremarkable” 7.2 percent average increase in adjusted per-share profit for the quarter, Aiken said.

“It’s unremarkable against the earnings growth Canadian banks have shown in the past,” Aiken said in a May 20 phone interview. “When you take it in context of the deceleration of earnings growth we’re seeing at the Canadian banks it becomes one more data point to the headwinds they’re experiencing.”

Canadian Imperial will be the laggard, reporting its first profit decline since the fourth quarter of 2009, according to analysts’ estimates compiled by Bloomberg. Domestic retail banking earnings will be down in part because of CIBC’s sale of half of its Aerogold Visa portfolio -- its most popular card -- to Toronto-Dominion in December. The Toronto-based bank reports on May 29.

Wealth Management

Canadian Imperial’s quarterly profit excluding one-time items will fall 3.5 percent to C$2.05 a share from a year earlier, according to estimates of 11 analysts. The bank said May 15 it recorded a C$420 million ($385 million) impairment charge on its Caribbean business and C$123 million of incremental loan losses in the region.

A message left with Kevin Dove, a CIBC spokesman, wasn’t returned.

Royal Bank, Canada’s second-largest lender, is estimated to boost per-share adjusted profit by 9.3 percent, while Toronto-Dominion, the biggest bank, will see a 7.3 percent increase in quarterly earnings, according to estimates. Both are based in Toronto.

The banks’ wealth-management businesses should benefit from improving equities markets. Canada’s benchmark Standard & Poor’s/TSX Composite Index rose 5.2 percent in the quarter and the MSCI World Index gained 0.8 percent.

“Wealth management is going to have an exceptionally good quarter,” Aiken said.

Record Highs

The eight-company Standard & Poor’s/TSX Commercial Banks Index rose 4 percent this year, compared with the 2.3 percent decline of the KBW Bank Index of 24 U.S. lenders. Canada’s four-biggest banks -- Toronto-Dominion, Royal Bank, Bank of Nova Scotia (BNS) and Bank of Montreal (BMO) -- have touched record highs within the past month. Canadian Imperial gained 1 percent to C$97.38 at 4:02 p.m. in Toronto.

National Bank of Canada (NA) is the only one of the six expected to increase its dividend, according to Bloomberg’s dividend forecasts. The Montreal-based lender will boost its quarterly payout by about 3.3 percent, according to the forecast.

Investment-banking revenues at Canada’s largest lenders may slump on fewer mergers and acquisitions and a decline in the amount raised from equity financings in the period. Canadian companies were involved in 408 completed takeovers valued at $41.5 billion in the quarter, down from 526 deals valued at $60.4 billion a year earlier, according to data compiled by Bloomberg.

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

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net; David Scanlan at dscanlan@bloomberg.net Steven Crabill, Steve Dickson

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