CIBC to Avoid ‘Frothy’ Wealth Deals in U.S. Private-Banking PushDoug Alexander
Canadian Imperial Bank of Commerce will be disciplined and won’t pursue a U.S. wealth-management takeover if it undermines the bank’s financial strength or costs too much, Chief Executive Officer Victor Dodig said.
“We look at acquisitions we know we’d like to do in the U.S., but we won’t be drawn into high prices or companies that we don’t feel fit our culture,” Dodig, 49, said in an interview in Calgary, where the bank is holding its investors meeting Thursday.
Dodig, the former wealth-management head who became CEO seven months ago, said he’s willing to spend C$2 billion ($1.63 billion) to add to its U.S. businesses of Atlantic Trust Private Wealth Management and American Century Investments, including a push toward private banking. Still, wealth-management valuations are high, Dodig said in a speech to investors, making the Toronto-based lender prudent about takeovers.
“When things get frothy you start focusing on organic growth,” Dodig said in the interview.
CIBC has boosted Atlantic Trust’s assets by about 35 percent to $27 billion and added about 60 professionals since buying the firm in January 2014, Dodig said. American Century’s assets have risen to $150 billion from $111 billion in August 2011, when CIBC bought a 41 percent stake in the money manager, he said.
CIBC is looking for other deals, Dodig said. “We are monitoring, we are engaged with certain companies, but it’s going to take some time to get to the right price point,” he said.
Dodig said he’d be interested in having a U.S. private-banking service that builds off Atlantic Trust.
“A bank that would bank the entrepreneurs, business clients, that would be very much attached to what we do within Atlantic Trust,” Dodig said. “Many clients have said to us ‘Look, can you do our banking for us?’”
Dodig also emphasized the use of technology to better serve customers and a desire to be Canada’s strongest bank on measures including capital ratios and credit ratings.
“I think CIBC can be seen as one of the best managed banks,” Dodig said in the interview.
He’d also like improvements in CIBC’s share price to earnings ratio, which at 10.5 times is the lowest among Canada’s six largest lenders.
“Right now it’s not where I think it can be,” Dodig said.
CIBC’s push for technology -- the bank unveiled an application for Apple Inc.’s watch at the meeting -- will continue to drive costs, Dodig said, with this year marking a peak in spending. Technology investments will leave CIBC at the lower end of its 5 percent to 10 percent profit-growth target range, he said.
CIBC will adopt new technologies as customers do, including Apple Pay, he said.
“Apple has a brand following,” Dodig said. “They have a solution. Over time if our clients want it, we’re going to have to adopt it.”