January 15, 2008 / 3:37 PM / 10 years ago

UPDATE 1-Bank shares roil Toronto stock market

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TORONTO, Jan 15 (Reuters) - Toronto’s main stock market index dropped more than 200 points on Tuesday amid falling commodities shares and worries over the health of the North American banking shares and another writedown at Canadian Imperial Bank of Commerce CM.TO.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 227.63 points, or 1.7 percent, at 13,470.65.

All 10 of the TSX index’s main groups were lower, led by a 2.5 percent drop in the influential energy group and a 1.8 percent fall in the heavily weighted financial group. The commodity heavy materials group was down 1.3 percent.

These three groups account for more than 75 percent of the overall weighting of the market.

Bank stocks were rattled by bleak news on both sides of the border.

CIBC said on Monday it will take almost $2.5 billion in pretax writedowns related to the U.S. subprime mortgage crisis, and raise about C$2.75 billion ($2.70 billion) in stock sales to rebuild its balance sheet.

CIBC, Canada’s fifth-largest bank, said it will take a $2 billion pretax writedown in its financial first quarter related to the subprime mortgage hedge protection it bought from ACA Financial Guaranty Corp.

As well, it plans to sell chunks of shares to institutional investors at C$65.26 and C$67.05 per share. Shares of CIBC dropped C$2.07 to C$70.00.

Meanwhile, Citigroup Inc C.N said a huge writedown for mortgages triggered a nearly $10 billion quarterly loss, about twice analysts’ estimates, and that it was raising $14.5 billion, slashing its dividend and cutting 4,200 jobs.

“It’s not a very good sign when the financials are in disarray,” said Sal Masionis, a stockbroker at Brant Securities. “The CitiGroup and the CIBC news hit the market and it’s is now in a bit of a disarray.”

All of the country’s biggest banks were lower including Royal Bank of Canada RY.TO, which dipped 70 Canadian cents to C$49.00 and Bank of Montreal BMO.TO which dropped C$1.03 to C$56.48.

Energy shares dropped as the price for crude oil retreated 2.2 percent to $92.10 a barrel on worries over a recession in the United States and expectations of a rise in U.S. inventories.

EnCana Corp ECA.TO slipped C$1.75 to C$67.51 and Suncor Energy SU.TO fell C$2.33 to C$104.12. Talisman Energy TLM.TO was off 66 Canadian cents at C$18.70.

Talisman said on Tuesday it will shave spending this year to C$4.4 billion ($4.36 billion) from C$4.65 billion in 2007.

Production in 2008 is forecast at between 435,000 and 460,000 barrels of oil equivalent a day, compared with estimates of 452,000 boe per day from last year.

Falling materials share also weighed on the market with Teck Cominco TCKb.TO down 99 Canadian cents at C$34.26 and Potash Corp POT.TO off C$1.23 at C$151.63.

However, gold issues were buoyed by the price for the precious metal, which remained firm above $900 an ounce. Barrick Gold ABX.TO, one of the biggest producers in the world, was up 53 Canadian cents at C$52.90. ($1=$1.02 Canadian) (Reporting by Scott Anderson; Editing by Bernadette Baum)

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