CIBC's PrivateBank Takeover Helps It Avoid Being ‘Too Canadian’By
Lender posts earnings that beat estimates; raises dividend
Profit from U.S. commercial banking, wealth climbs 362%
Canadian Imperial Bank of Commerce’s push to be less domestically focused is showing signs of success, thanks to its June takeover of Chicago-based PrivateBank.
The country’s fifth-largest lender by assets posted profit of C$134 million ($106 million) from U.S. commercial banking and wealth management in the fiscal first quarter, only its second full reporting period since the $5 billion PrivateBank acquisition. A year ago, the Toronto-based lender earned C$29 million from that U.S. business.
PrivateBank is “performing very well, and they in the longer term are going to be a very important part of our story," Chief Financial Officer Kevin Glass said Thursday in an interview. “We’re very happy with their performance and expect it to grow over time."
Chief Executive Officer Victor Dodig is seeking to diversify CIBC beyond its borders, using the firm’s PrivateBank acquisition as a vehicle to expand business banking, wealth management and capital markets in the U.S. At a December investor event, Dodig acknowledged criticisms that CIBC was “too Canadian-focused” and forecast that the U.S. would account for 17 percent of earnings within three years. The U.S. represented about 14 percent of the bank’s total first-quarter earnings, Glass said
Canadian Imperial is the first large Canadian lender to report results for the quarter ended Jan. 31, posting adjusted profit Thursday that beat analysts’ expectations. The nation’s six biggest banks are expected to increase adjusted per-share earnings by 5 percent from a year earlier, according to analysts’ estimates compiled by Bloomberg. Results will be affected by changes to accounting rules, impacts from U.S. tax changes and, to a lesser extent, Canadian mortgage rule revisions that kicked in Jan. 1. CIBC took an C$88 million charge in the period tied to the U.S. tax overhaul.
CIBC “reported solid results across most business segments,” Canaccord Genuity Group Inc. analyst Scott Chan said in a note to investors. “As the first bank reporting, we see strong read-throughs for the rest of the bank reporting season.”
The bank’s shares rose 0.6 percent to C$117.22 at 9:59 a.m. in Toronto, paring this year’s decline to 4.5 percent.
Here’s a summary of CIBC’s results:
- Net income fell 5.6 percent to C$1.33 billion, or C$2.95 a share, from C$1.41 billion, or C$3.50, a year earlier, the Toronto-based bank said in a statement. Adjusted earnings were C$3.18 a share, topping the C$2.83 average estimate of 13 analysts surveyed by Bloomberg. The bank raised its quarterly dividend 2.3 percent to C$1.33 a share.
- Total revenue climbed 5.9 percent to C$4.46 billion, while non-interest expenses rose 13 percent to C$2.58 billion.
- Canadian personal and small business banking profit fell 19 percent to C$656 million from a year earlier, when the bank had a C$299 million gain from the sale and lease back of branches. Excluding that gain, earnings rose 17 percent.
- Canadian commercial-banking and wealth-management profit rose 14 percent to C$314 million.
- Capital markets earnings fell 7.2 percent to C$322 million, fueled by lower fixed-income and commodities-trading revenue and fewer underwriting fees.
- Canadian mortgage and home-equity credit line balances increased 9.6 percent from a year ago.