Canadian Imperial Bank of Commerce's profit slipped in the fourth quarter, largely because of weaker capital markets earnings, but earnings were in line with analyst expectations.
The bank reported net income of $811-million, down 1.7 per cent from the year prior. After adjusting for one-time items, CIBC made $2.24 per share, just a penny shy of analyst estimates.
The bank hiked its quarterly dividend by 3 cents to $1.03 per share and appointed John Manley the chairman of its board, who replaces the outgoing Charles Sirois.
CIBC's full-year profit totalled $3.2-billion, down 4 per cent from 2013, after incurring a substantial charge in the second quarter to write down the value of its Caribbean business.
CIBC also incurred a $112-million one-time charge in the fourth quarter to revalue its derivatives portfolio – something other banks have also reported.
Much like its peers, CIBC benefited from hot capital markets and wealth management earnings for much of fiscal 2014. Despite the fourth-quarter charge, full-year capital markets profit still jumped 28 per cent and wealth management's earnings climbed 22 per cent higher, boosted by acquisitions the bank has made in the U.S.
However, the impact of this strength on the bottom line was more muted for CIBC because the bank is the most exposed to the Canadian retail market, with domestic personal and commercial banking profits comprising over 70 per cent of its profit.
CIBC is looking to expand its wealth management footprint, particularly in the U.S. On a conference call Thursday, chief executive officer Victor Dodig said the bank is currently assessing deals worth between $1-billion and $2-billion.
Retail and business banking earnings slipped to $602-million in the fourth quarter, but full-year profit was up 4.5 per cent. CIBC has warned that it is still investing heavily in its retail banking systems, such as one that will make it easier to cross-sell products to clients. Such expenses are expected to make it difficult to realize profit growth in the near future.
This business is also in the midst of a strategic revamp – the results of which will take time to play out. Most notably, the bank recently sold half of its Aeroplan credit card portfolio, which generated a one-time gain but hurt revenues in future quarters. Adjusting for this sale, CIBC's retail and business banking profit jumped 9 per cent in fiscal 2014.
The bank's retail retooling involves betting big on new partnerships, signing deals with Tim Hortons Inc. to launch a new credit card and the Greater Toronto Airports Authority to be the sole bank allowed to advertise and operate inside Canada's largest airport.