CIBC Pares Virus Impact With 67% Surge in Capital Markets Profit

(Bloomberg) -- Canadian Imperial Bank of Commerce got a boost from its capital-markets operations, helping the nation’s fifth-biggest bank counter earnings erosion brought on by the coronavirus pandemic.

• Trading has been a bright spot for Canadian firms during he quarter as the crisis boosted market volatility and activity, and CIBC has benefited as well. Earnings at the bank’s CIBC Capital Markets division climbed 67% to C$392 million ($298 million), fueled by higher trading and investment-banking fees, as fiscal third-quarter earnings beat analysts’ estimates.

Key Insights

• CIBC, like its domestic peers, continues to shore up its loan-loss reserves to counter the economic impacts of Covid-19. The bank set aside C$525 million in its third quarter, less than the record C$1.41 billion in provisions in the second quarter but still up from the C$291 million a year earlier.
• Canadian personal and small-business banking is led by Laura Dottori-Attanasio, the one-time chief risk officer who took over CIBC’s biggest division in March. Earnings from the domestic division fell 23% this year to C$508 million on lower revenue resulting from the pandemic’s economic impact.
• CIBC has a commercial-banking and wealth-management presence on both sides of the Canada-U.S. border, thanks to its 2017 purchase of Chicago-based PrivateBancorp. The U.S. business posted a 64% earnings decline to C$62 million, while in Canada earnings fell 7% to C$320 million.
• Domestic mortgage growth is a key focus for investors, and they’re looking to see if CIBC builds on an “encouraging” fiscal second-quarter upswing to move beyond two years of “significant underperformance,” said Scotiabank analyst Meny Grauman. That happened, with mortgage balances at C$207 billion in the third quarter, compared with C$204 billion in the prior period and C$201 billion a year ago.

Market Reaction

• CIBC shares have fallen 5.6% this year through Wednesday, outperforming the 9.6% decline for the eight-company S&P/TSX Commercial Banks Index.

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• Third-quarter net income fell 16% to C$1.17 million, or C$2.55 a share. Adjusted per-share earnings of C$2.71 beat the C$2.18 average estimate of 12 analysts in a Bloomberg survey.
• Read more about CIBC’s quarterly results here.

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