(Reuters) - Canadian Imperial Bank of Commerce (CM.TO) became the second Canadian bank in as many months to reveal lay offs as it contends with a tough environment for revenue growth.
Victor Dodig, chief executive of Canada’s fifth-largest bank, told staff on Thursday that CIBC needs to challenge itself to be “a more efficient bank by focusing on continuous improvement and keeping a careful eye on costs,” according to a memo seen by Reuters.
“As a result, some team members will be leaving our bank in the coming months,” he said in the memo, without saying how many jobs would be cut. A CIBC spokesman declined to comment.
CIBC has improved its efficiency ratio, which measures non-interest expenses as a percentage of revenue, to 55.5% in 2019 from 60.4% in 2015. Even so, Dodig said in the memo: “We have work to do to lower this ratio further.”
Rising bad-loan provisions and subdued deal-making are weighing on bank earnings, while the fallout of the new coronavirus emergency is further clouding the economic outlook.
Controlling costs is particularly vital for CIBC, which already expects expenses to grow at 4-5% this year, double the pace of its rivals, as it attempts to catch mortgage growth up to other banks.
“It’s not necessary that they’d be retrenching their plans to expand the mortgage business,” said Brian Madden, portfolio manager at Goodreid Investment Counsel in Toronto. “But they’d probably be offsetting that investment by cutting costs elsewhere.”
The bank’s shares dropped by the most in a decade last month after it posted disappointing fiscal fourth-quarter earnings driven by worse-than-expected loan loss provisions.
The shares closed down 0.1% in Toronto on Thursday, in line with the Toronto stock benchmark .GSPTSE.
Rival Bank of Montreal (BMO.TO) last month revealed a restructuring charge of C$357 million ($272 million), largely related to cuts of about 5% of its workforce, or 2,300 employees.
CIBC and TD Bank (TD.TO) have said they could also take restructuring charges this year.
CIBC’s cuts are not likely to be as steep as BMO’s, given “BMO had more fat to trim,” Madden said.
Reporting by Nichola Saminather in Toronto and C Nivedita in Bengaluru; Editing by Shinjini Ganguli and Leslie Adler