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CIBC Second-Quarter Profit Rises 5.7% on Consumers

Canadian Imperial Bank of Commerce, the country’s fifth-biggest bank, said second-quarter profit rose 5.7 percent on consumer lending gains, topping analysts’ estimates.

Net income for the quarter ended April 30 was C$811 million ($790 million), or C$1.90 a share, compared with C$767 million, or C$1.80 a share, a year earlier, the Toronto-based bank said today in a statement. Revenue rose 2.3 percent to C$3.08 billion.

CIBC joins Canada’s other banks in posting higher profit from consumer lending, as record-low interest rates fueled borrowing. Analysts and investors anticipate domestic banking profit growth at banks will slow in the second half of 2012 as Canadians with record-high household debt pare borrowing.

“Earnings are still pretty good,” Todd Johnson, who helps manage C$350 million including CIBC shares at BCV Asset Management in Winnipeg, Manitoba, said today in an interview. “Absent of some shock, I don’t see a huge erosion in bank earnings over the next year.”

CIBC said it had adjusted earnings of C$2 a share, compared with the C$1.88 a share average estimate of 17 analysts surveyed by Bloomberg News.

CIBC climbed 2.5 percent to C$72.07 at 4 p.m. in Toronto, its biggest gain in six months, leading a rise among Canadian banks.

Consumer Lending

Consumer lending and business banking earnings climbed 12 percent to C$556 million, as mortgages, deposits and business loans rose. Net interest margin, or the difference between what a bank charges for loans and pays in deposits, widened to 2.56 percent from 2.52 percent in the first quarter, after the lender shifted from broker mortgages to more profitable CIBC-branded home loans sold in branches.

The bank said it continues to “explore strategic options, including a potential sale” of its FirstLine Mortgages broker brand.

Canadian Imperial will expand its weekday banking hours and open more branches on weekends starting September to focus on customers and bolster sales, David Williamson, CIBC’s head of consumer lending, said in a conference call.

Canadian Imperial set aside C$308 million for bad loans, up from C$245 million.

CIBC said economic growth should be “modest” in Canada and the U.S. this year, with gross domestic product gains of about 2 percent in Canada and slightly higher in the U.S.

‘Slower Growth’

“Retail and business banking will face slightly slower growth in demand for mortgages, while consumer credit demand could continue to see limited growth,” the bank said in the statement. “Demand for business credit should decelerate to a still healthy growth rate.”

The slower economic growth is unlikely to result in a deterioration in household credit quality, with the unemployment rate holding steady, the bank said.

Wealth management profit, which includes mutual fund sales, rose 8.2 percent to C$79 million after adding earnings from its purchase of a 41 percent stake in American Century Investments in August.

CIBC said today it agreed to sell its “niche” Hong Kong-and Singapore-based private wealth management business in a transaction expected to be completed next year.

CIBC’s investment-banking business earned C$131 million, down from C$140 million, on a capital markets slump and losses in a structured credit business that it’s exiting. Underwriting and advisory fees slipped 11 percent to C$114 million. Trading revenue rose 18 percent to C$172 million.

Caribbean Banking

The lender’s corporate unit, which includes Caribbean banking, had profit of C$45 million, down from C$58 million.

CIBC’s exposure to Europe was C$6.05 billion at the end of the quarter, with C$24 million tied to Europe’s so-called “peripheral countries,” the bank said in a presentation.

National Bank of Canada, the country’s sixth-largest lender, also reported higher profit today on consumer banking and a gain from a sale of an asset manager, beating estimates. Profit for the Montreal-based lender rose 69 percent to C$553 million, or C$3.22 a share, from C$327 million, or C$1.57 a share, a year earlier.

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