Big U.S. Bet Pays Off for CIBC With Earnings Ahead of Target

(Bloomberg) -- A year after buying Chicago-based PrivateBank in its biggest ever acquisition, Canadian Imperial Bank of Commerce’s U.S. foray is already exceeding its expectations.

CIBC’s U.S. head Larry Richman -- the veteran Chicago banking executive who migrated with the $5 billion acquisition completed in June 2017 -- said he’s driving a “strong and steady" expansion under the wings of Canada’s fifth-largest lender by assets.

Big U.S. Bet Pays Off for CIBC With Earnings Ahead of Target

“We feel like we’ve got some major things to accomplish," Richman, 66, said in an interview from his personal conference room at CIBC’s newly adopted U.S. headquarters in Chicago.

Richman’s ambitions include opening a commercial banking office in Dallas, adding bankers, and targeting areas such as technology and innovation, construction engineering and health care for loans. He’s also seeking retail deposits with a new online high-interest savings account called CIBC Agility.

“Business is really good," Richman said while sitting beside CIBC CEO Victor Dodig in the wood-paneled room dotted with framed photographs of the 1920s-era building, business trophies and sports paraphernalia. “This is truly the next chapter of our growth and success and opportunity."

CIBC’s acquisition sought to break the Canadian lender’s dependence on domestic lending. The Toronto-based bank earned C$272 million ($210 million) from U.S. commercial banking and wealth management in its first fiscal half, a fivefold increase from a year earlier, to account for 10 percent of overall earnings.

Dodig, 53, said that he’s “very confident” CIBC will surpass its goal of 17 percent of earnings from the U.S. by 2020 -- a bar set in December that also includes U.S. capital markets. The bank is “ahead of target,” he said.

CIBC was little changed at C$115.31 at 9:59 a.m. trading in Toronto. The shares have risen 8.8 percent in the past 12 months, compared with the 8.6 percent rise of Canada’s eight-company S&P/TSX Commercial Banks Index.

As CEO of CIBC Bank USA -- the new name for PrivateBank -- Richman said he’s working to integrate operations with CIBC and build client relationships. The business has generated more than $1.3 billion of client deposits since the acquisition closed.

The advances have impressed analysts including National Bank Financial’s Gabriel Dechaine. “So far, so good,” Dechaine said in a phone interview. “It has been a pretty good ride so far.”

Double-Digit Growth

Adding more loans and leveraging CIBC’s balance sheet will be key to growth, he said.

“This is supposed to be an asset-gathering expansion story, so they’ve got to win more customers, get some deposit growth and avoid mishaps," Dechaine said. The business must generate “double-digit bottom-line growth” to hit its 2020 target, he said.

The bank is capitalizing on a Midwest economy benefiting from strong manufacturing growth, gains in consumer and business spending, while unemployment is at the lowest since 2000.

Cross-border opportunities have emerged. Richman is targeting more upper middle-market clients now that he’s able to offer CIBC’s investment banking expertise -- something PrivateBank didn’t really have before.

“We’re seeing clients that are coming to us with new business opportunities, because we now have a Canadian capability,” Richman said.

CIBC U.S. bank had $17.2 billion of loans and $17 billion in deposits for the fiscal quarter ended April 30, according to disclosures. PrivateBank had $15.5 billion of loans and $16.3 billion in deposits as of the end of March 2017, before the takeover.

Related story: CIBC is paying U.S. head more than its CEO

Big U.S. Bet Pays Off for CIBC With Earnings Ahead of Target

Having PrivateBank’s managers lead the U.S. region “has worked out really, really well,” Dodig said. “They’re incredibly capable, seasoned executives who know how to run a bank.”

Richman has a long history in Chicago. He started his career in the mid-1970s at American National Bank and in 1981 joined Exchange National Bank, which was acquired by LaSalle Bank in 1990. He climbed LaSalle’s ranks and was head of commercial banking when Dutch parent ABN Amro Holding NV named him president and CEO in January 2007. He took over the role just months before Bank of America Corp. bought the company for $21 billion that year.

Richman didn’t stay. He was hired a month later to head PrivateBank, reuniting him with more than two dozen senior bankers who switched after the LaSalle sale. When Richman took over PrivateBank, a lender that opened its first office in 1991 in Chicago, he spent a decade building up the bank and ultimately catching Dodig’s eye.

Chicago Headquarters

When CIBC offered to buy PrivateBancorp Inc. in June 2016 for $3.8 billion, the firm had $17.7 billion of assets, about 1,200 employees in 35 locations and a market value of about $2.8 billion. CIBC ultimately paid $5 billion in what became the largest acquisition in the Canadian lender’s 151-year history. PrivateBank’s stately building in Chicago’s financial district now bears the CIBC name on its colonnaded entranceway on South LaSalle Street.

CIBC made sure Richman stuck around, signing him to a three-year contract. As group head of the U.S. region, he oversees Atlantic Trust private wealth management and has kept oversight of the rebranded PrivateBank as president and CEO.

Richman has held onto his key lieutenants, including former LaSalle veterans Bruce Lubin, who oversees commercial banking in Illinois, and Karen Case, president of U.S. commercial real estate. Richman, who said he still sees two clients a day, seems content under Canadian ownership.

“I feel really good about it, I’m having fun,” Richman said. “I’m probably working harder than I’ve ever worked -- and I’ve always worked hard.”

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