CIBC tops forecasts as profit more than triples from pandemic low

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Canadian Imperial Bank of Commerce’s second-quarter profit more than tripled from its pandemic low a year ago, boosted by plunging loan loss provisions and strong results from capital markets.

For the three months that ended Apr. 30, CIBC earned $1.65-billion, or $3.55 per share, compared with $392-million, or 83 cents per share, in the same quarter last year.

On an adjusted basis, CIBC said it earned $3.59 per share, which was much higher than the consensus estimate among analysts of $3.01 per share, according to Refinitiv.

CIBC is the second major bank to report earnings for the fiscal second quarter, after Bank of Montreal
reported surging profit on Wednesday, driven by similar factors.

For CIBC, the largest swing from a year ago was in provisions for credit losses – the money banks set aside to cover loans that may default. In the quarter, CIBC earmarked just $32-million in new provisions, compared with $1.4-billion a year ago, and $147-million in the first quarter.

The bank set aside $246-million in case of losses from loans that are already past due, but offset most of that by reclaiming $214-million that had previously been set aside in case loans that were still current turned sour. After banks built billions of dollars in reserves against losses early in the crisis, actual losses have been minimal as massive government stimulus programs helped ease a cash crunch for many businesses and households.

Profit from CIBC’s core retail banking unit has bounced back to prepandemic levels, at $603-million, up 270 per cent from a year earlier. The bank benefited from a strong increase in mortgage balances, which rose 9 per cent amid hot housing markets. But credit card balances are down 13 per cent year over year, despite a 21-per-cent increase in card purchase volumes.

In the Canadian commercial banking and wealth management unit, profit of $399-million was up 94 per cent year over year, as provisions for credit losses plunged and revenue increased 11 per cent. Demand for loans continues to be slower, as commercial lending balances increased only 2 per cent from a year ago. And profit from U.S. commercial banking and wealth management rose to $206-million, from $18-million a year earlier, driven by a sharp reversal in provisions for credit losses. Loan balances increased faster in the U.S., rising 4 per cent.

Capital markets profit jumped to $495-million, from $137-million in the same quarter last year, with higher revenue from trading as well as corporate and investments banking.

The bank kept its dividend steady at $1.46 per share, as Canada’s banking regulator has temporarily prohibited dividend increases and share buybacks. And its capital levels edged higher, with CIBC’s common equity Tier 1 (CET1) ratio at 12.4 per cent, compared to 12.3 per cent in the first quarter.

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