Photographer: Brent Lewin/Bloomberg/Bloomberg

CIBC Mortgage Balances Rise Even as Home Prices Slide

  • Home loan balances increase 13% in quarter, most since 2007
  • CFO says pace of mortgage growth likely to slow in near future

Canadian Imperial Bank of Commerce’s brisk pace of mortgage growth may soon start to slow.

Average mortgage balances at the country’s fifth-largest lender by assets soared 13 percent in fiscal third quarter, the biggest year-over-year increase since 2007. But that may be coming to an end, as CIBC executives told investors Thursday they expect the rate to fall back in line with competitors.

CIBC has been an outlier among Canada’s largest lenders for almost two years on the rate at which its home-loan portfolio has expanded. The Toronto-based bank has pointed to a decision to beef up its mobile sales force to about 1,200 advisers after exiting its FirstLine mortgage broker business in 2012 as a reason for the jump.

“We don’t expect this level of growth carrying on indefinitely," Chief Financial Officer Kevin Glass said in a phone interview. "We have stabilized our mortgage adviser sales force, so over time what you will see is a stabilization and then certainly a decline in the growth rate."

CIBC shares were unchanged at C$107.60 at 9:44 a.m. in Toronto. The stock has fallen 1.8 percent this year, compared with the 0.2 percent advance of the eight-company S&P/TSX Commercial Banks Index.

CIBC’s domestic mortgage growth in the previous three quarters was double the rate of larger rivals Royal Bank of Canada and Bank of Montreal and more than triple that of Toronto-Dominion Bank and Bank of Nova Scotia. CIBC reported increases of 12 percent in the second quarter and 9.5 percent a year ago.

A diminishing run-off of FirstLine mortgages -- now less than a 10th of what was once a C$50 billion ($40 billion) mortgage book -- has also helped, the bank has said.

Prices Fall

CIBC has boosted exposure to mortgages even as Canada’s average home price fell 1.5 percent in June -- the most in nearly a decade -- led by Toronto’s 4.7 percent decline. Ontario’s government introduced measures in April that included a foreign buyer’s tax to cool what officials called unsustainable price gains, following similar measures enacted last year in Vancouver.

“We’re very comfortable with the quality of our mortgage growth and the deep client relationships that we have," Glass said. “We’ve been very careful in our lending, very prudent, and made sure that, from a customer perspective, affordability is there."

Average mortgage balances climbed to C$194.6 billion in the three months ended July 31 from C$188.6 billion at the end of the second quarter and C$172 billion a year earlier, CIBC said Thursday in its financial disclosures.

Mortgages contributed to an 8 percent increase in profit at CIBC’s Canadian retail and business banking division, its largest operation. That helped offset a 10 percent earnings decline in capital markets, which had lower revenue from trading and equity underwriting.

Net income for the period fell 24 percent to C$1.1 billion, or C$2.60 a share, from C$1.44 billion, or C$3.61, a year earlier, when it had a gain from selling its stake in U.S. money manager American Century Investments, according to the statement. Profit excluding some items was C$2.77 a share, beating the C$2.66 average estimate of 13 analysts surveyed by Bloomberg. CIBC raised its dividend 2.4 percent to C$1.30 a share, its 10th increase in 12 quarters.

CIBC’s $5-billion takeover of Chicago-based PrivateBancorp added C$23 million to profit in the quarter, the bank said, even though the deal closed just five weeks before the end of the period.

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