There were moments in Canadian Imperial Bank of Commerce's year-long courtship of U.S. lender PrivateBancorp when chief executive officer Victor Dodig felt like the world was against him.
Two days before CIBC unveiled its landmark deal to buy the Chicago-based bank on June 29 of last year, for about $3.8-billion (U.S.) at the time, financial markets were roiled by a surprise Brexit vote in the United Kingdom. And that was just the start of the upheaval.
A month before shareholders were set to vote on CIBC's offer, Donald Trump was elected U.S. President, ushering in a wave of pro-business optimism mixed with political instability. Then the U.S. Federal Reserve began signalling that it might raise its key interest rate faster than expected. It was all good news for PrivateBancorp, a successful mid-market commercial lender with a loan book that is acutely sensitive to interest rates; for CIBC, they proved to be costly surprises.
The uncertainty that dogged CIBC's signature acquisition over the last year is water under the bridge now, as the deal officially closed on Friday, and Mr. Dodig finally claimed his prize. The Canadian bank has a foundational foothold from which to rebuild its U.S. presence – which was largely unwound after a series of missteps in the late 1990s and early 2000s – and has begun tapping new sources of growth. But it came at a price: Faced with soaring U.S. bank valuations, CIBC postponed a shareholder vote and twice hiked its offer price to about $4.9-billion (U.S.) to secure enough support from investors. And through it all, Mr. Dodig insists he never felt that the two banks were out of step.
"Not at all," he says in an interview from a conference room high atop CIBC's Toronto headquarters. "In fact, I think this has all hardened our resolve of the benefit over the long term to our clients, to our team, to our shareholders."
Now the real work begins. Mr. Dodig presents a friendly face at CIBC's helm, having started at CIBC as a teller when he was at university. But he has hard-headed ambitions for the banks as they begin working in tandem. In the next decade, he aims to build "one of the most prominent business banks in North America," with the U.S. arm chipping in a quarter of CIBC's profits.
In the nearer term, he and PrivateBancorp CEO Larry Richman, a respected relationship banker who will lead CIBC's U.S. operations, have charted a course for rapid growth through 2020. The U.S. arm expects to take advantage of CIBC's superior credit rating, larger balance sheet and broader range of capabilities, and Mr. Richman has already fielded new opportunities from clients.
"In a couple of cases, we've seen that we've been able to win things that we couldn't have before," Mr. Richman said in an interview this week.
Yet there may not be much margin for error. Some analysts think that expectations about interest rate hikes, tax reform and deregulation were baked into CIBC's escalating purchase price but are now far from certain to materialize on schedule.
"Some were factored in, some were not factored in. And our job as leaders, as managers, is to make sure that we can manage through any curveball that gets thrown our way," Mr. Dodig said, adding, "If we build the right kind of franchise, we'll be able to withstand all those shocks."
For the next two years, at least, CIBC expects most of the growth to come from within, even as Mr. Dodig keeps his ear to the ground for smaller-scale acquisitions that could complement its U.S. strategy. "I think when we talk about the tuck-ins, we talk about wealth management," he said.
Another part of the challenge is getting bigger, stronger and more digitally advanced while keeping the character that made PrivateBancorp attractive in the first place. "I would say the defining characteristic would be a relationship-based bank where it's high-touch, but also high-tech," Mr. Dodig said. "It's not being a Wall Street bank. It is being a bank to private business in the United States, primarily, and serving those entrepreneurs."
For now, the two chief executives must lead the delicate task of stitching together their institutions – PrivateBancorp, Chicago's third-largest bank with footprints in 13 states and $28-billion in assets, and CIBC, Canada's fifth-largest lender with national reach and $529-billion in assets. "We continue to believe that the integration of [PrivateBancorp] is a significant task and that it presents some material risk to CIBC's near-term earnings outlook," said John Aiken, an analyst at Barclays Capital Canada Inc., in a research note.
It will mean merging technologies, clearing regulatory burdens and forging a common culture. "We've done lots of time together in terms of understanding the DNA of our respective organizations," Mr. Dodig said.
From his perch in Chicago, Mr. Richman expects a "smooth and thoughtful" transition, and is ready to move past the uncertainty that swirled around the merger earlier this year.
"Everyone here is charged to close and move on and build for the next chapter," he said.