Canadian Imperial Bank of Commerce , the first large Canadian bank to report its first-quarter financial results, said Thursday that it earned $652-million, up from $147-million a year ago.
The results topped expectations, with CIBC's profits amounting to $1.65 per share after they are adjusted for unusual items. Analysts were forecasting earnings of about $1.42 per share.
The bulk of the bank's profits came from basic Canadian consumer banking, the business that CIBC has chosen to concentrate on in the wake of the credit crisis.
Revenues in both consumer banking and wholesale banking have risen, chief executive Gerry McCaughey noted. He said that CIBC took advantage of improving credit markets during the quarter, which ended Jan. 31, to further shrink the structured credit portfolios that the bank is winding down after being stung by risky exposures during the crisis.
The amount of money the bank has set aside for troubled loans rose to $365-million, from $278-million a year ago, as a result of higher losses in its personal lending business at FirstCaribbean International Bank.
However, CIBC's provisions for credit losses were down significantly from the prior quarter, Barclays Capital analyst John Aiken pointed out in a note to clients.
While the bank's results benefited from a couple of positive trends that are likely to fall off at some point - including high trading revenues - the market will likely focus on the fact that profit margins are up, lending is up, capital is stronger, and exposures to structured credit are declining, Mr. Aiken said.
"We fully expect CIBC's valuation to benefit significantly from what are admittedly very strong results," he wrote. "Further, we believe that the market will quite rightfully extrapolate these positive results to the other banks and generate a lift to the sector as positive credit and net interest income stories are likely transferable.
"That said, we have seen in recent quarters that early positive results have not necessarily been replicated by each bank that subsequently reports."