Canadian Imperial Bank of Commerce fourth-quarter earnings took a hit from both weak trading and investment banking fees as well as a structured credit loss in what the bank said was a "slow quarter" for its wholesale division.
Fourth-quarter profit came in at $500-million, or $1.17 a share, down from $640-million and $1.53 a share the previous quarter. Earnings were also down from the same period in 2009 when CIBC raked in a $644-million profit.
The biggest hit came from the wholesale banking division, which includes trading and investment banking. Total revenue for the segment fell $77-million from the third quarter and the unit reported a net loss of $56-million.
Trading income fell into a deep slump, generating just $8-million versus $84-million the previous quarter. Underwriting and advisory fees also dropped to $87-million from $108-million in the third quarter.
"It was a slow quarter from a couple of perspectives," Richard Nesbitt, chief executive officer of CIBC World Markets told analysts on a conference call, adding that new equity issues slumped across the industry.
However, he said there are signs that business is picking up. "We are starting to see much better tone towards the end of October and November."
Mr. Nesbitt noted that CIBC recently led a $1-billion equity financing for Husky Energy, and a $1-billion bond financing for BCE, as well as other deals. "So I think things are looking better right now. Hopefully that will continue," he said.
CIBC's fourth quarter numbers were affected by a few key changes. The bank realized a $122-million loss on its structured credit business and a $117-million loss from capital repatriation. However, the bank's credit provisions improved, falling to $150-million from $221-million the previous quarter.
Retail banking operations were one of the few bright spots for CIBC with revenues from personal banking, business banking and wealth management all slightly higher than the previous quarter. Although the segment's net income slipped to $576-million from $599-million during the third quarter, profit was much higher than the same period in 2009.
Analyst Jason Bilodeau at TD Newcrest told clients in a research note that the retail results, along with profits from the credit card division, helped lessen the blow of a slumping quarter on the wholesale side.
"Retail saw decent results with volume growth and improved margins, Mr. Bilodeau said. "Credit was also better than expected. This looks to have largely offset what looks to be a fairly soft quarter in wholesale."
CIBC did not boost its dividend, but said the bank may entertain an increase in the near future.
"The discussion around dividend increases is one that is starting to come into focus a little bit more than when I would have talked about this in the past," CIBC chief executive officer Gerry McCaughey said, adding that the decision will be based on earning trends in the quarters ahead. "We're not there quite yet…. [but]as we make progress, this topic is something that is getting a little bit closer."