Photographer: Andrew Harrer/Bloomberg

CIBC Sees 17% of Earnings Coming From U.S. Businesses by 2020

Canadian Imperial Bank of Commerce said it expects earnings contributions from its U.S. businesses to almost double to 17 percent in the next three years as the lender integrates its acquisition of Chicago-based PrivateBancorp Inc.

“Our goal is to diversify outside of Canada," Chief Executive Officer Victor Dodig said Wednesday at the firm’s investor day in Toronto. “With our investment in PrivateBank we have a significant opportunity to grow in the United States,” especially in business banking, he added.

Dodig, acknowledging that CIBC is “too Canadian-focused," said this year’s $5 billion PrivateBancorp deal will also allow the Toronto-based lender to expand its wealth-management and capital markets businesses to U.S. clients. CIBC collected 9 percent of its earnings from the U.S. in 2017, up from 6 percent two years ago.

CIBC said it expects profit contributions from Canadian personal and small-business banking to shrink to 45 percent by 2020 from the current 48 percent, while domestic commercial banking and wealth will be little changed at 25 percent. The lender sees Canadian capital markets representing 13 percent of overall earnings by 2020, compared with 19 percent this year.

Caribbean Lender

Dodid also said CIBC is considering a U.S. stock listing for FirstCaribbean International Bank, in which it owns about a 92 percent stake. He said the business is performing well “despite weathering some incredible natural hardships particularly over the last little while."

He said a share listing would be a way “of tapping into the deepest capital pool," adding that the company is already publicly listed on some stock exchanges and has minority shareholders.

CIBC FirstCaribbean had net income of $142 million in fiscal 2017 and a market value of about $2 billion, according to its annual report.

At Wednesday’s investor day, CIBC also:

  • Reiterated its goal of 5 percent to 10 percent compound annual growth rate in earnings.
  • Set a new efficiency ratio target of 52 percent by 2022.
  • Lowered its goal for adjusted return on equity to “15 percent plus through the cycle" from an earlier range of 18 percent to 20 percent. 
  • Reduced its dividend payout ratio target to 40 percent to 50 percent from an earlier goal of about 50 percent.
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