More writedowns seen after CIBC's C$1.46 bln loss

Thu Feb 28, 2008 6:14pm EST
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By Lynne Olver

TORONTO (Reuters) - Canadian Imperial Bank of Commerce posted a big first-quarter loss on Thursday after taking pretax charges of C$3.38 billion ($3.47 billion) and executives acknowledged that further writedowns may be needed.

The charges on U.S. mortgage-related securities and credit protection were higher than the US$2.5 billion figure the bank had warned of in January.

Market and economic conditions affecting U.S. bond insurers that are related to CIBC's investments could change, and this could result in "significant future losses," the bank said in its quarterly release.

The bank, which has been damaged by the U.S. mortgage crisis more than any of its Canadian rivals, said it lost C$1.46 billion, or C$4.39 per share, in the three months ended January 31. That compared with a profit of C$770 million, or C$2.11 a share, a year earlier.

At the bank's annual meeting in Toronto, Chief Executive Gerry McCaughey said the writedowns were "a significant disappointment" to bank management, directors and shareholders alike.

The bank replaced several senior executives in January, and issued 45.3 million new shares worth C$2.9 billion to shore up its balance sheet in the wake of its structured-credit problems, which trace back to the U.S. subprime mortgage meltdown last summer.

With its recent equity issue, CIBC's balance sheet should be able to absorb further writedowns, if necessary, executives stressed.

"We've given everyone a snapshot of where we are now, the U.S. economy of course is developing on a dynamic basis," McCaughey told reporters after the meeting. "We believe that we're actually positioned for it, if things did turn out to deteriorate."   Continued...