Canadian Imperial Bank of Commerce CM-T reported a 23-per-cent increase in fiscal second-quarter profit that beat analysts’ estimates, announced a deal to sell its Caribbean division for US$1.6-billion and shuffled its top executive team.
Profits were up across each of the bank’s business units in the quarter that ended April 30. Capital markets earnings increased 40 per cent from a year earlier as revenue from trading and investment banking surged, and the bank recovered funds previously earmarked to cover losses on loans.
CIBC earned $2.47-billion, or $2.53 a share, compared with $2.01-billion, or $2.04 a share, in the same quarter last year.
After adjusting for amortization costs, CIBC said it earned $2.54 a share. The consensus estimate among analysts going into the quarter was $2.42 a share, according to Bloomberg.
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A breakdown of the big Canadian banks’ second-quarter earnings
The bank also announced a plan to buy back up to 30 million shares, or 3.3 per cent of its outstanding share count, over the next year. Its quarterly dividend was unchanged at $1.07 a share.
All six of Canada’s largest banks reported profits that surpassed analysts’ expectations, with Royal Bank of Canada RY-T and Toronto-Dominion Bank TD-T also reporting results on Thursday.
CIBC said it has reached a deal to sell its 91.67-per-cent stake in CIBC Caribbean to Bermuda-based The Bank of N.T. Butterfield & Son. CIBC will receive US$1-billion in cash and Butterfield shares currently worth US$645-million.
“The transaction enables us to allocate capital towards our highest strategic growth priorities,” chief executive officer Harry Culham said on a Thursday conference call.
The deal is expected to close in the first half of 2027, and CIBC will own about 22 per cent of the combined bank.
CIBC has done business in the Caribbean since the 1920s, and previously tried to sell a majority stake in the unit to a group led by Colombian banker and real estate developer Jaime Gilinski. Regulators blocked that transaction amid a health crisis over the spread of COVID-19.
“The effective exit from the Caribbean, which the bank has been attempting for some time, is a welcome relief,” Jefferies analyst John Aiken said in a note to clients. “However, we do not view CIBC’s results as positively as some of its peers this quarter.”
Mr. Culham also announced the first changes to his senior executive team since he took the helm at the bank last November. The leadership shuffle returns the bank to a more conventional structure, with commercial banking and wealth management each run by a single executive. Previous CEO Victor Dodig had combined the commercial and wealth divisions in Canada and the U.S.
Susan Rimmer has been named group head of commercial banking, adding responsibility for CIBC’s U.S. commercial operations to her existing duties leading the Canadian division.
Eric Belanger will be group head of wealth management, taking on oversight of the business in Canada and the U.S. from Ms. Rimmer. He was most recently head of CIBC Global Asset Management, and has worked at the bank for more than 30 years.
Kevin Li will continue to serve as group head of the U.S. region and CEO of CIBC Bank USA.
Chief of staff Amy South was also named chief administrative officer, as current CAO Christina Kramer will leave the bank on Oct. 31, after a stint as a special adviser.
Chief financial officer Robert Sedran adds oversight of enterprise transformation to his role.
The executive moves are effective on Thursday.
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In the second fiscal quarter, CIBC’s provisions for credit losses - the money the bank earmarks to cover potential losses on defaulted loans - was unchanged from a year earlier, at $605-million.
Provisions on loans that are past due increased by $85-million, to $548-million. Chief risk officer Frank Guse said some parts of the bank’s loan portfolios came under “more pressure than anticipated earlier in the year,” citing higher unemployment rates and geopolitical tensions.
Profit from Canadian personal and business banking was up 15 per cent to $846-million, compared with a year earlier. Loan balances increased 2 per cent and the profit margin on lending increased by 32 basis points. (100 basis points equal one percentage point).
Capital markets profit was $792-million, with revenue up 21 per cent. A busy quarter for equities trading and advisory work in corporate and investment banking helped boost the division’s earnings. The bank also reclaimed $15-million of previous loan-loss provisions.
Canadian commercial banking and wealth management profit increased 12 per cent to $614-million, as loans and deposits each increased 7 per cent and profit margins improved.
And the bank’s U.S. division, which focuses on commercial banking and wealth management, had profit of $260-million, up 56 per cent year over year. Provisions for credit losses were lower than a year ago, while loan and deposit balances were up 6 per cent and 8 per cent respectively.