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Noah Zivitz

Managing Editor, BNN Bloomberg


Canadian Imperial Bank of Commerce edged past profit expectations in its latest quarter despite a jump in expenses in its core Canadian banking business stemming from its purchase of the Costco credit card portfolio.

CIBC reported $1.67 billion in net income for the three-month period that ended July 31, down four per cent from a year earlier when it earned $1.73 billion. Its adjusted earnings per share were $1.85; the average analyst estimate was for $1.83.

“As the economic environment continues to evolve, we remain focused on delivering shareholder value by taking a disciplined approach to capital allocation to execute our strategy, focusing on key client segments, further enhancing client experience, and investing in future differentiators for our bank,” said CIBC president and chief executive officer Victor Dodig in a release.

Like its peers that reported earlier in the week, CIBC said in its release Thursday that it set aside more funds for loans that could eventually go bad, citing "an unfavourable change in our economic outlook and unfavourable credit migration." However, its $243 million in provisions was less than in the preceding quarter when it booked $303 million for potential loan losses. 

“With provisions coming down from the second quarter (after front loading a quarter before its peers) some of the overhang lingering from the previous quarter’s reporting may dissipate,” stated John Aiken, Barclays’ head of research in Canada, in a note to clients.

Profit from CIBC's Canadian personal and business banking unit fell seven per cent year-over-year to $595 million. It blamed the profit erosion in part on $200 million that was booked as provisions for credit losses, as well as its expenses, which climbed 17 per cent year-over-year to $1.31 billion. The bank cited outlays tied to the Canadian Costco credit card portfolio as a reason for the mounting expenses. Loan growth was a mitigating factor; notably, CIBC’s Canadian residential mortgage book expanded about nine per cent from a year earlier, reaching a net $262.52 billion.

CIBC’s Canadian commercial banking and wealth management unit stood out as the only segment of the bank to post profit growth in the latest quarter, as net income inched up three per cent to $484 million as loan activity soared almost 21 per cent year-over-year — which Aiken said should be welcomed by investors.

The bank said its net income from capital markets activities fell nine per cent year-over-year to $447 million.

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