Analysis: CIBC's Canada focus raises concerns as growth slows

Wed May 1, 2013 4:35pm EDT
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By Cameron French

TORONTO (Reuters) - Canadian Imperial Bank of Commerce's remake from swashbuckling Wall Street player to low-risk Canada-focused lender has stabilized its earnings, but some shareholders now worry that the bank faces outsized exposure to an uncertain housing market.

The bank's homebound approach - which CIBC trumpets as a road to reduced risk - is a direct result of previous U.S. forays that cost the bank billions following the 2001 tech meltdown and the 2008 subprime crisis.

But with Canadians dealing with record personal debt levels, and with a slowdown in the once-booming housing market fueling talk of a crash, CIBC's lack of international exposure has gone from being seen as an advantage to being viewed as a burden.

"They have the highest exposure to Canada and their lack of growth platforms outside of Canada really exposes them to the Canadian consumer," said Jeff Bradacs, a portfolio manager at Manulife Asset Management.

The bank is not completely averse to international exposure, having made modest acquisitions in U.S. wealth management, most notably its C$848 million ($841.14 million) acquisition of 41 percent of American Century Investments in 2011.

But that business pales in comparison with the large foreign investments made in recent years by rivals such as Toronto-Dominion Bank and Bank of Nova Scotia, and some say this gives CIBC few growth options outside of the already crowded Canadian market.

"What the market is struggling with is that we don't have any strong map as to where they're going," said John Aiken, an analyst at Barclays Capital.

CIBC's lack of international growth has not hit its profits as yet, as its retail earnings have flourished due to mortgage lending in a fast-growing housing market.   Continued...

A Canadian Imperial Bank of Commerce (CIBC) branch is seen in Toronto November 9, 2007. REUTERS/Mark Blinch