April 23, 2015 / 3:44 PM / in 3 years

CIBC says it in talks on potential $2 billion U.S. acquisition

CALGARY (Reuters) - Canadian Imperial Bank of Commerce CM.TO is in talks with several U.S. companies on a potential $2 billion wealth-management and private-banking acquisition, its top executive said in an interview.

A pedestrian walks past a main branch of CIBC in Montreal, April 24, 2014. REUTERS/Christinne Muschi

But Chief Executive Victor Dodig said CIBC, which has been eyeing the U.S. wealth management space for a while, must be patient as such companies don’t come cheap.

Such a deal by Canada’s No. 5 lender would increase its scale and help ease concerns among some investors that the bank might be too exposed to the domestic Canadian market.

Financial services firms, including banks and insurers, are targeting the wealth management market because of its growth prospects.

“It’s a business we know, it’s a business where the demographic trends are benefiting us and it’s a business that has attractive economic characteristics,” Dodig said ahead of the lender’s annual meeting in Calgary, Alberta.

“I have several different conversations that are ongoing, where I get to understand the company,” he added. “Some of them may well lead to a partnership.”

Dodig led CIBC’s wealth management unit before he took the bank’s helm in 2014.

The U.S. wealth management industry is the world’s biggest and has been growing strongly as the number of millionaires rises and the U.S. job market recovers. But this has also driven up valuations.

“Valuations have gotten stretched in the U.S. market,” Dodig said. “We don’t want to overpay on that front.”

In 2014, CIBC completed its purchase of Atlantic Trust Private Wealth Management from Invesco Ltd in a deal valued at $210 million.

CIBC is not the only Canadian bank looking to expand its presence in the U.S. wealth management market.

Earlier this year, Royal Bank of Canada RY.TO said it would buy Los Angeles-based City National Corp CYN.N for $5.4 billion.

Dodig said he is also looking to increase spending on technology, an area other Canadian banks have also been pursuing.

Earlier in April, Bank of Nova Scotia BNS.TO Chief Financial Officer Sean McGuckin said the lender would invest “significantly more” in technology over the next three years.

“We’re the fastest adopter of technology among all the (Canadian) banks,” Dodig said.

Editing by Jeffrey Hodgson; and Peter Galloway

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