CIBC profit beats expectations on gains in capital markets, lower loan-loss reserves

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Canadian Imperial Bank of Commerce reported higher third-quarter profit than expected, bolstered by lofty earnings from its capital markets business and lower reserves set aside to cover future losses.

For the three months that ended July 31, CIBC earned $1.17-billion, or $2.55 a share, compared with $1.4-billion, or $3.06, in the same period a year earlier.

Adjusted for one-time items, CIBC said it earned $2.71 a share, whereas analysts expected earnings per share of $2.13, according to Refinitiv.

The bank took new provisions for credit losses – the funds set aside to cover loans that may default – of $525-million, up 80 per cent from a year ago but still less than analysts expected, and far shy of the $1.41-billion in new reserves the bank earmarked last quarter as the pandemic took hold.

CIBC is still deferring payments for loans worth a combined $37.7-billion in Canada and the United States, including $33.3-billion in Canadian mortgages, virtually all of which are expected to expire before the end of October.

But the bank boosted its capital levels, increasing its capacity to absorb potential losses, with its common equity Tier 1 (CET1) ratio – a key measure of a bank’s resilience – rising to 11.8 per cent, from 11.3 per cent last quarter.

CIBC's capital markets division was the standout in the third quarter, with profit up 67 per cent to $392-million, continuing a trend of outsized results from trading activity also seen at other major Canadian banks.

Yet profit from personal and small business banking in Canada, which is the bank’s largest division, fell 23 per cent to $508-million, as lower interest rates squeezed margins and clients were less active amid pandemic-related lockdowns.

And commercial banking and wealth management profits were down 7 per cent in Canada, to $320-million, and 64 per cent in the U.S., to $62-million, as a result of higher provisions for loan losses.

CIBC held its quarterly dividend steady at $1.46 a share.

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