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CIBC’s Soured-Loan Provisions Surge to a Record $1.03 Billion

CIBC’s Soured-Loan Provisions Surge to a Record $1.03 Billion

(Bloomberg) -- Canadian Imperial Bank of Commerce set aside more than five times than the amount it did a year earlier to prepare for the deteriorating financial health of households and businesses from the coronavirus pandemic and a plunge in oil prices.

  • Canada’s banks are building reserves to prepare for pain resulting from pandemic-related shutdowns, and CIBC is no different. The Toronto-based lender had a record C$1.41 billion ($1.03 billion) in provisions for credit losses in the fiscal second quarter. Earnings missed analysts’ estimates.

Key Insights

  • Canadian personal and small-business banking is under the new leadership of Laura Dottori-Attanasio, the one-time chief risk officer who took over CIBC’s biggest division just as the Covid-19 crisis began disrupting the economy. The domestic division earned C$203 million in the quarter, down 64% from a year earlier.
  • Canada’s fifth-largest lender by assets has been pushing to get more earnings from the U.S. after buying boutique investment bank Cleary Gull Inc. last year and Chicago-based PrivateBancorp in 2017. CIBC earned C$18 million from U.S. commercial banking and wealth management in the quarter, down 89% from a year earlier. That compares with a 37% decrease for Canadian commercial banking and wealth management.
  • Market volatility during the early days of the Covid-19 outbreak gave a boost to traders on both sides of the border, helping earnings in most banks’ capital-markets divisions. That didn’t pan out at CIBC Capital Markets, where earnings fell 52% to C$137 million, with a decline in trading revenue.

Market Reaction

  • CIBC shares have fallen 15% this year as of Wednesday’s close, compared with the 16% decline of the eight-company S&P/TSX Commercial Banks Index.

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  • Second-quarter net income fell 71% to C$392 million, or 83 cents a share. Adjusted per-share earnings of 94 cents missed the C$1.60 average estimate of 12 analysts in a Bloomberg survey.
  • Read more about CIBC’s quarterly results here.

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