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A photograph of the CIBC sign in Toronto's financial district in downtown Toronto on Thursday, Feb. 26, 2009. Profit at the capital markets arm of CIBC rose 15 per cent to $304-million in the third quarter, thanks in part to a number of multibillion-dollar investment banking transactions.NATHAN DENETTE/The Canadian Press

Profit at the capital markets arm of Canadian Imperial Bank of Commerce rose 15 per cent to $304-million in the third quarter, thanks in part to a number of multibillion-dollar investment banking transactions.

Underwriting and advisory revenue jumped 34 per cent to $142-million, the highest level for the bank-owned dealer in almost two years.

During the quarter, CIBC acted as a financial adviser (alongside RBC Dominion Securities) for Lowe's Companies Inc. in its $3.2-billion deal to buy Rona Inc. CIBC was also a lead underwriter for Suncor Energy Inc.'s $2.9-billion bought deal in June. (TD Securities and J.P. Morgan Canada Securities also co-led.)

Elsewhere in capital markets, trading revenue at CIBC rose 8 per cent to $348-million year over year, with every product line moving higher, from fixed income to commodities to foreign exchange. Even equities trading, which was a weak spot for RBC earlier in the week, rose both year over year and sequentially.

The street greeted Toronto-Dominion Bank's capital markets results with even more ebullience. There was "broad-based strength" across all sectors in the third quarter, Robert Sedran, an analyst with CIBC World Markets Inc., wrote in a note to clients.

Profit at TD's wholesale banking unit, which includes capital markets and corporate lending, rose 26 per cent to $302-million. Fees from underwriting and advisory revenue jumped to $177-million from $122-million. Trading revenue increased 5 per cent to $447-million.

TD and CIBC continued what has been a robust earnings season so far for Canada's bank-owned dealers.

"All the banks have been beating our expectations on capital markets," Peter Routledge, an analyst with National Bank Financial, said in an interview.

The trading arms of all of the bank-owned dealers have been benefiting from what he terms as "Goldilocks" volatility: an environment of heightened volatility that's hot enough to prompt people to trade, but not so cold as to scare them off entirely.

"There's been a healthy amount of fear and greed," Mr. Routledge said.

"When people freeze and just don't do anything, that's when it's bad for the banks," he added.

In late June, Brexit sparked enormous volatility across equity and bond markets. Immediately after Britain's shock vote to leave the European Union, volatility of the bad kind arose, explained Mr. Routledge. RBC's only day of trading losses in the quarter came shortly after Brexit.

But in the weeks that followed, "Goldilocks" volatility took over. And this is precisely the kind of anxiety-provoking, but not paralyzing, volatility that traders have been dining out on ever since.

Next week, National Bank of Canada and Bank of Nova Scotia, the last of the big six Canadian banks, cap the sector's third-quarter results.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/03/24 4:00pm EDT.

SymbolName% changeLast
BNS-N
Bank of Nova Scotia
-0.22%49.69
BNS-T
Bank of Nova Scotia
-0.24%67.28
CM-N
Canadian Imperial Bank of Commerce
+0.73%49.6
CM-T
Canadian Imperial Bank of Commerce
+0.72%67.17
D-N
Dominion Energy Inc
+1.4%48.51
NA-T
National Bank of Canada
+1.06%111.39
RY-N
Royal Bank of Canada
-0.07%99.27
RY-T
Royal Bank of Canada
-0.22%134.34
SU-N
Suncor Energy Inc
+0.72%36.34
SU-T
Suncor Energy Inc
+0.61%49.16
TD-N
Toronto Dominion Bank
-1.33%59.26
TD-T
Toronto-Dominion Bank
-1.4%80.23

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