August 25, 2010 / 10:44 AM / 8 years ago

UPDATE 3-CIBC profit tops estimates, pushes shares higher

* Q3 adj EPS C$1.64 vs est C$1.53

* Loan-loss provisions C$221 mln vs C$547 mln

* Stock rises 2.5 percent (Adds CEO, analyst comments, adds stock gains)

By Cameron French

TORONTO, Aug 25 (Reuters) - Quarterly profit at Canadian Imperial Bank of Commerce (CM.TO) rose 47.5 percent, topping expectations, and sending the bank’s shares 2.5 percent higher.

Strong branch-banking revenues and a sharp reduction in provisions to cover bad loans helped drive profit up to C$640 million ($603 million), or C$1.53 a share, from C$434 million, or C$1.02 a share, a year earlier, CIBC said on Wednesday.

Stripping out a C$138 million loss from its structured credit run-off business and a C$76 million reversal of provision for credit losses, the bank earned C$1.64 a share in its third quarter.

That beat analysts’ forecasts for a profit of C$1.53 a share, as polled by Thomson Reuters I/B/E/S.

CIBC said provisions for bad loans dropped to C$221 million from C$547 million.

Revenues from CIBC’s domestic retail banking operations rose 7 percent year-over-year to C$2.5 billion, driven by strong results from personal banking, business banking, and wealth management, it said.

“The (retail) division has been a bit of a disappointment over the last few quarters, where revenue growth has been fairly light,” said Juliette John, portfolio manager at Bissett Investment Management.

“This quarter, I think we’ve seen a fairly good element of growth.”

Wholesale banking revenue dropped 43 percent to C$315 million as the bank took a loss from its structured credit business and lower trading activity.

A sharper drop in trading income reported by Bank of Montreal (BMO.TO) on Tuesday sparked a sell-off in Canadian bank stocks as investors feared results from Canada’s other big lenders — due to be released over the next week — would show similar shortfalls.


CIBC’s Tier 1 capital ratio, a measure of its financial stability, was a robust 14.2 percent, up from 12 percent a year earlier, while return on equity for the quarter was 19.8 percent.

Speaking on a conference call, Chief Executive Gerry McCaughey said the bank was in a good position to adapt to new global capital and liquidity rules that will be finalized by the Basel banking committee later this year.

“We feel now that although there’s still uncertainty there, that there’s enough information out to give us a preliminary indication that CIBC will continue to be well positioned from a capital viewpoint,” he said.

Capital outlays such as large acquisitions and dividend hikes have been on hold as the banks have waited to see what measures they may have to take to satisfy the new regulations.

McCaughey warned, however, that dividend hikes are unlikely until the bank’s earnings justify such a move.

Currently, CIBC’s payout ratio — the amount of profit it spends on its dividend — is a bit above its normal 40 to 50 percent range, meaning the bank would need earnings to rise more to get it back in the range before it would consider an increase.

“On the dividend increase side, we do not look at capital as the first factor (to consider), we look at payout ratio,” he said.

“We’re getting fairly close now, so I would say that it will be under consideration and discussion in 2011.

CIBC’s shares were up C$1.65 at C$68.46 just after midday on Wednesday on the Toronto Stock Exchange.

Royal Bank of Canada (RY.TO), Canada’s largest bank, and National Bank of Canada (NA.TO) will report quarterly results on Thursday.

$1=$1.06 Canadian Reporting by Cameron French; editing by Peter Galloway

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