CIBC beats as loan provisions slide, capital markets profit soars 67%

Noah Zivitz, BNN Bloomberg

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Canadian Imperial Bank of Commerce beat fiscal third-quarter profit expectations by a wide margin as provisions for credit losses tumbled and with a big lift from the institution's capital markets business.

Net income for the three months ending July 31 was $1.17 billion, compared to $1.39 billion a year earlier. On an adjusted basis, CIBC earned $2.71 per share; analysts, on average, were expecting $2.18 in adjusted profit per share.

CIBC set aside $525 million in the latest quarter for loans that could go bad, down almost 63 per cent from the previous quarter when the bank had $1.41 billion in provisions.

Similar to its peers, CIBC's capital markets business was the star performer in the fiscal third quarter as profit in that division surged 67 per cent year-over-year to $392 million. In a release, the bank attributed the growth to factors including higher financing activities, gains in underwriting revenue, as well as interest rate and commodities trading activity.

CIBC's other divisions didn't fare nearly as well. Its core Canadian banking business saw profit drop 23 per cent year-over-year to $508 million, with CIBC citing "lower revenue as implications from the COVID-19 pandemic continue to impact the business." Meanwhile, earnings in its domestic commercial banking and wealth management division slipped seven per cent.

Profit from the bank's U.S. operations also came under pressure, with net income sliding 64 per cent year-over-year.

"We delivered solid financial results in the third quarter as our team maintained a tireless focus on our clients, helping make their ambitions a reality during a period of disruption for many," said President and CEO Victor Dodig in a release Thursday. "The continued execution of our strategy and ongoing investments in our business, as well as disciplined expense management, have contributed to our resilience and positioned us well for the evolving macroeconomic environment.”