February 25, 2016 / 11:41 AM / 2 years ago

UPDATE 2-Canada's CIBC warns of higher loan losses due to oil slump

* Expects increased loan-loss provisions going forward

* Q1 profit beats market expectations

* Impaired loans in oil and gas sector climb (Recasts with executive comments from conference call)

By John Tilak and Matt Scuffham

TORONTO, Feb 25 (Reuters) - Canadian Imperial Bank of Commerce said on Thursday it expects loan losses to increase as the oil price slump impacts energy clients, and warned they could double if Canada went into recession.

Chief Risk Officer Laura Dottori-Attanasio made the forecast after CIBC posted a first-quarter profit that topped market expectations, with growth in retail and business banking offsetting losses from oil sector loans that turned sour.

“If we went into a recessionary-type environment we could see ourselves doubling our loan losses,” Dottori-Attanasio told analysts on a conference call on Thursday.

CIBC joined rivals Royal Bank of Canada and Bank of Montreal in reporting increased losses from impaired loans in the oil and gas sector. Dottori-Attanasio said that trend was likely to continue.

“We are seeing this quarter a lot of downgrades in the oil and gas space, an increase in delinquencies. Our expectation would be to see increased loan loss provisions on a go-forward basis,” she said.

CIBC’s gross impaired loans in the oil and gas sector climbed to C$128 million in the first quarter, from C$125 million in the fourth quarter and zero in the year-earlier period.

Net income for the quarter ended Jan. 31 was C$982 million, or C$2.43 per share, compared with C$923 million, or C$2.28 per share, a year ago. Excluding special items, earnings rose to C$2.55 per share.

Analysts on average had expected earnings of C$2.41 a share, according to Thomson Reuters I/B/E/S.

CIBC recorded a 6 percent rise in earnings at its retail and business banking division. Net income slipped 7 percent at its wealth management unit and was down 10 percent in capital markets.

It also raised its quarterly dividend. (Editing by Elaine Hardcastle, W Simon and Paul Simao)

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