CIBC Cuts Jobs, Shuffles Executives in Cost-Control Mission

(Bloomberg) -- Canadian Imperial Bank of Commerce shuffled its top management ranks, cut jobs and took a restructuring charge as Chief Executive Officer Victor Dodig works to control costs.

Canada’s fifth-largest lender by assets recorded a C$339 million ($255 million) charge in its fiscal first quarter to cover severance from staff reductions, as the pace of expense growth accelerated for a sixth straight quarter. CIBC also named new managers including the head of its largest division, Canadian personal and business banking, where the main product line -- mortgages -- lagged behind rivals in the past year.

The moves are part of Dodig’s efforts to reshape the Toronto-based bank while improving efficiencies. CIBC follows Bank of Montreal and Toronto-Dominion Bank in taking restructuring charges in recent quarters, as tighter margins, rising provisions and a more challenging operating environment damp revenue growth and spur Canadian lenders to cut costs to increase earnings.

The job cuts will affect almost 5% of CIBC’s employees, Chief Financial Officer Hratch Panossian said on a conference call Wednesday. Based on the bank’s 45,083 full-time positions in the first quarter, the reductions equate to about 2,200 employees, the biggest cut in two decades.

The reductions come as non-interest expenses soared 11% to C$3.07 billion -- the highest in more than 14 years -- with the bank citing higher performance-based compensation, the restructuring and “continued investments to fuel future growth” for the jump.

The restructuring charge, which totaled C$250 million after taxes, “supports an enterprise-wide program to accelerate delivery of our priorities, including improving our efficiency,” Dodig said on the call. “We’re not taking these decisions lightly, but the restructuring will help us repurpose our cost structure as we simplify, reinvest in and position our bank to further strengthen our relationships with our clients.”

Expense Push

Dodig’s expense push is showing some progress, with the bank’s adjusted efficiency ratio -- a measure of what it costs to produce a dollar of revenue -- improving to 55% in the three months through Jan. 31 from 56% in the fourth quarter. In December, Dodig changed his efficiency target to what he said was a more “realistic” range of 53.5% to 54% for 2022, from an earlier goal of 52%.

The bank’s shares were little changed at C$106.13 at 9:36 a.m. in Toronto. They’ve dropped 1.6% this year, compared with a 0.7% increase in the S&P/TSX Commercial Banks Index.

CIBC also reworked its management ranks, with Chief Risk Officer Laura Dottori-Attanasio becoming senior executive vice president of Canadian personal and business banking, the company’s largest division. She replaces Christina Kramer, who was named senior executive vice president of technology, infrastructure and innovation.

Shawn Beber was appointed chief risk officer, and Harry Culham, CIBC’s capital markets head, was given added responsibilities for the Caribbean, the bank’s CIBC Mellon custodial banking partnership and direct-to-consumer businesses including Simplii Financial. The moves are effective March 2, CIBC said.

CIBC’s quarterly results beat analysts’ estimates, with a 2.5% increase in net income led by surging capital-markets earnings and gains from the company’s Canadian banking and wealth management divisions. The bank also raised its dividend.

“Overall we have a positive view” on results, RBC Capital Markets analyst Darko Mihelic wrote in a note to clients. “Better results versus our forecast were largely capital markets driven and all other major segments were relatively in line with our forecast.”

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, ;Derek Decloet at ddecloet@bloomberg.net, Daniel Taub, Steve Dickson

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