CIBC Raises Its Dividend After Earnings Surpass Estimates

Canadian Imperial Bank of Commerce raised its dividend by 2 percent and posted profit that beat analysts’ estimates on lower-than-expected provisions for bad loans.

Net income for the second quarter ended April 30 slid 65 percent to C$306 million ($282 million), or 73 cents a share, from C$862 million, or C$2.09, a year earlier, as the lender incurred loan losses and writedowns in the Caribbean. Profit excluding some items was C$2.17 a share, the Toronto-based bank said today in a statement, compared with the C$2.02 average estimate of 11 analysts surveyed by Bloomberg.

“While the consensus ‘beat’ and dividend hike are nice, our enthusiasm toward the CIBC numbers is limited by the fact that the strongest aspect are low provisions and high securities gains, which offset weaker-than-expected operating leverage trends in retail,” Sumit Malhotra, an analyst with Scotia Capital, said in a note to clients.

Earnings from investment banking and wealth management rose 11 percent and 29 percent respectively. The lender set aside C$330 million for bad loans, a 25 percent increase from a year ago. Adjusted provisions fell 24 percent to C$185 million, lower than forecasts by analysts.

CIBC shares fell 0.9 percent to C$98.12 at 9:39 a.m. trading in Toronto.

Card Sale

The lender, the last of the country’s six biggest banks to report results, lifted its quarterly dividend 2 cents to C$1 a share, following payout increases announced this week by National Bank of Canada and Bank of Montreal. Revenue rose 1.4 percent to C$3.17 billion from the year-earlier period.

Canadian Imperial took a C$420 million impairment charge for its Barbados-based bank and C$123 million of loan losses for the Caribbean in the quarter, matching its May 15 announcement of costs tied to the region’s slumping economy.

The Caribbean writedowns resulted in a net loss of C$570 million for its corporate unit, which includes international banking.

Earnings for retail and business banking fell 4.5 percent to C$546 million from a year earlier, eroded by lower credit-card revenue from the sale of half CIBC’s Aerogold Visa portfolio in December to Toronto-Dominion Bank, the company said. Aerogold is the bank’s most popular credit card.

Wealth Management

Wealth-management profit rose to C$117 million amid growing assets under management and additional contributions from its $210 million takeover of Atlantic Trust Private Wealth Management in January. Canadian Imperial has said its goal is to earn 15 percent of its total profit from wealth management, compared with about 11 percent last year.

The lender’s wholesale banking business posted profit of C$213 million on higher revenue and lower taxes. Underwriting and advisory fees slipped 9.3 percent to C$88 million, while trading revenue fell 9 percent to C$150 million from a year ago.

“This looks to be a big source of outperformance and helped by investment gains, and solid trading revenue an in-line brokerage, advisory and securities gains,” Jason Bilodeau, an analyst at Macquarie Capital Markets in Toronto, said in a note.

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