August 31, 2011 / 10:19 AM / 7 years ago

UPDATE 4-CIBC shares jump on strong earnings, dividend hike

* Q3 earning jump 26 pct to C$808 million

* Ex-items EPS C$1.91 vs analysts’ view C$1.81

* Raises dividend to C$0.90 from C$0.87

* Shares up 4.4 pct in Toronto (Adds details, comment, share price)

By Cameron French

TORONTO, Aug 31 (Reuters) - Canadian Imperial Bank of Commerce (CM.TO) reported a higher-than-expected quarterly profit and raised its dividend for the first time in four years, driving its shares up more than 4 percent on Wednesday.

The dividend hike of 3.4 percent is the first by a Canadian bank this quarter, although four of CIBC’s large rivals have boosted payouts in the wake of the 2008 financial crisis, which had put a temporary moratorium on dividend hikes.

“The increase itself was fairly nominal,” said Craig Fehr, a St. Louis-based analyst at Edward Jones.

“I think it was more a sign to the marketplace that management feels comfortable that their capital is in a position where they can now start looking to deploy it as opposed to accumulate it.”

The results and dividend increase prompted investors to drive CIBC shares to their highest level since before the stock market downturn that began in late July.

About 50 minutes into trading, the shares were up 4.4 percent at C$76.30 on the Toronto Stock Exchange, outperforming the bank’s peers by a wide margin.

Canada’s No. 5 lender earned C$808 million ($824 million), or C$1.89 a share, in the quarter, up 26 percent from C$640 million, or C$1.53 a share, a year earlier.

Excluding special items, earnings per share were C$1.91, topping analysts’ estimates of C$1.81.

CIBC is the fifth Canadian bank to report this quarter. Toronto-Dominion Bank (TD.TO), the last of the “big six” to report, will release results early on Thursday.

“On a core basis, CIBC generated the strongest beat against consensus that we have seen this quarter,” Barclays Capital analyst John Aiken said in a note.


Wholesale banking profit, which comes from investment banking, trading and other markets-related revenue, jumped to C$145 million from C$25 million, thanks to higher investment banking revenue and a sharp drop in losses from CIBC’s structured credit business.

Wealth management income rose to C$68 million from C$53 million.

Profit from retail and business banking, CIBC’s largest division, increased to C$539 million from C$526 million, driven by higher loan volumes, some of which was from the 2010 acquisition of Citigroup’s (C.N) Canadian Mastercard business.

The loan growth offset the impact of narrowing interest margins, as low rates limited what the bank could charge for loans.

The prospect of continued low rates has put the focus on cost controls as a way to wring more profit from a slow-rising revenue line.

Non-interest expenses rose 5 percent on the year, and CIBC Chief Executive Gerry McCaughey said a number of initiatives were underway to consolidate expenses.

“As a result of that, I would say that the expense picture is reasonably good going forward,” he told analysts and media on a conference call.

Unlike its larger Canadian peers, CIBC does not have a significant international presence. It retrenched within Canada after costly international missteps involving the collapse of energy trader Enron and the U.S. subprime mortgage crisis.

But in July the bank said it was buying a minority stake in U.S. asset manager American Century Investments, and some analysts have wondered whether that means CIBC may be ready to develop a meaningful international growth strategy.

$1=$0.98 Canadian Reporting by Cameron French; editing by Rob Wilson

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