CIBC Misses Analysts’ Estimates as Expense Gains Accelerate

(Bloomberg) -- Canadian Imperial Bank of Commerce is seeing costs rise as the lender ramps up spending to boost businesses in the U.S. and domestically.

Non-interest expenses rose 7.4% from the third quarter to C$3.14 billion ($2.5 billion), the Toronto-based bank said Thursday in a statement. That’s an acceleration from the previous 5.9% quarter-over-quarter gain it reported in August. Overall profit trailed analysts’ estimates. 

CIBC has been spending to expand its franchise in the U.S. as well as its Canadian personal and business banking unit to sustain the growth in mortgages and client retention it has seen in recent quarters. But those investments haven’t been cheap as labor costs rise and banks battle to retain talent, driving up CIBC’s salary costs 5% from the third quarter and increasing performance-based compensation 20% for the year.

Chief Financial Officer Hratch Panossian said CIBC will keep spending to help drive revenue gains.

“Our strategy is to generate positive operating leverage, but to do so through top-line growth rather than containing expenses or under-investing,” Panossian said on the company’s earnings call. 

CIBC slid 4.1% to C$135.44 at 9:40 a.m. in Toronto. The shares have advanced almost 25% this year, compared with a 27% gain for the S&P/TSX Commercial Banks Index.

The lender also raised its quarterly dividend 10% to C$1.61 a share, and announced a plan to buy back 10 million shares, or about 2.2% of outstanding shares. At the current share price, that would cost about C$1.4 billion. Canada’s banks last month were released from restrictions on dividend increases and share buybacks that regulators put in place early in the pandemic to protect the financial system.

Also in the statement:

• Net income rose 42% to C$1.44 billion, or C$3.07 a share, in the three months through Oct. 31. Excluding some items, profit was C$3.37 a share. Analysts estimated C$3.54, on average.
• CIBC took C$78 million in provisions for credit losses. Analysts estimated C$125.4 million, on average.
• Canadian banking profit rose 1.2% from a year earlier to C$597 million.

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