Canadian Imperial Bank of Commerce reported quarterly financial results that easily topped analysts' expectations, along with its fourth successive dividend hike, suggesting that the bank's focus on the Canadian market has not yet emerged as a handicap as the domestic economy struggles.
CIBC said that its profit in the third quarter rose to $978-million, up more than 6 per cent from last year. Adjusted earnings were $2.45 a share, well ahead of analysts' expectations for $2.31 a share and about 10 per cent above last year's per-share earnings – or the highest growth rate among the banks that have reported so far.
The lender also raised its dividend by 3 cents a share to $1.12, marking the fourth consecutive quarterly hike and a 12-per-cent boost over the past year.
The shares were up nearly 5 per cent in midday trading on Thursday, surpassing a broad market rally that drove up the S&P/TSX composite index by 2.8 per cent.
"Our performance this quarter underscores the progress we are making in executing our strategy to transform our bank," Victor Dodig, CIBC's chief executive officer, said during a conference call with analysts.
CIBC is considered to be the most domestic-focused lender among the Big Five, making it relatively more exposed to the struggling Canadian economy. Gross domestic product has contracted for five consecutive months and the Bank of Canada has responded with aggressive interest rate cuts in an attempt to halt the decline.
Mr. Dodig said energy-producing provinces will likely be hit by weaker economic activity as they adjust to low oil prices and a depressed energy sector. However, he said there are signs of rebounding manufacturing activity in Canada, driven by rising U.S. demand and a weaker Canadian dollar.
"These macro trends, combined with the benefits we're seeing from our client-focused strategy, are expected to mitigate the negative returns impact from a prolonged downturn in energy prices," he said.
CIBC strong results were reflected in a number of business areas. Retail and business banking adjusted profit rose 7 per cent from last year. Wealth management profit increased 15 per cent and wholesale banking climbed 8 per cent.
The bank's loan exposure to the oil and gas sector fell by about 2 per cent, quarter over quarter, and loans are showing few signs of stress as energy companies deal with an oil price that has slumped 60 per cent over the past year.
"This quarter, one oil and gas account of less than $10-million became impaired with no material losses expected from this account at this time," Laura Dottori-Attanasio, CIBC's chief risk officer, said during the conference call.
Meny Grauman, an analyst at Cormark Securities, said in a note that it was hard to find fault in CIBC's results, and that its share price was more a reflection of Canadian economic gloom than quarterly performance.
However, some observers believe this focus will remain: "With ongoing concerns regarding the outlook for the Canadian economy and CIBC's relative exposure, concerns regarding potential deterioration will likely limit the near to medium upside in terms of the bank's valuation multiple relative to peers," John Aiken, an analyst at Barclays Capital, said in a note.