Canadian Imperial Bank of Commerce plans to close up to 150 branches over the next three years as part of an effort to cut costs and wring more profit out of its retail operations.
During an investor presentation yesterday, CIBC said it would shutter 58 underperforming branches in 2003 and, in turn, open 10 state-of-the-art locations, including a flagship store in west Toronto this summer.
The move is expected to reduce CIBC's annual occupancy costs by about $10-million and shrink its retail network by about 4 per cent.
"Analysts have suggested that we are meaningfully overbranched," said Gerrard Schmid, executive vice-president and chief operating officer of CIBC's retail markets unit. "I would concur with that, but what I would add as well is that there are several markets where we are actually meaningfully under-represented."
Mr. Schmid told analysts the bank would have a similar level of closings and new branch openings in 2004 and 2005. This could reduce the network by a further 100 branches.
The bank has whittled down its sprawling retail presence by 147 locations or 11 per cent since 1999, and currently has 1,139 branches.
CIBC was hosting the conference to discuss its strategy for strengthening its retail and wealth management units. Like most banks, CIBC is increasingly emphasizing retail banking performance, following a year in which investment banking operations were devastated by negligible underwriting activity and billions of dollars' worth of soured loans to the troubled telecommunications and power sectors.
Indeed, one analyst warned yesterday that CIBC's stock could suffer a short-term impact because of new information suggesting the bank's relationship with Enron Corp. was more extensive than had previously been believed.
Michael Goldberg, an analyst with Desjardins Securities Inc., said a report issued this week by court-appointed examiner Neal Batson could raise questions about the adequacy of the bank's reserves to cover possible legal expenses stemming from Enron's implosion. He estimated those litigation reserves, recorded in the fourth quarter of 2002, at about $75-million.
Mr. Goldberg, who recently upgraded CIBC with a "buy" recommendation, said details of CIBC's involvement with Enron that were published in The Globe and Mail could nevertheless cast a "near-term cloud" over its shares.
A spokesman for CIBC declined to confirm the amount of litigation reserves, but said the bank is confident that the combination of its reserves and insurance coverage will cover any potential liabilities.
The 2,000-page report by Mr. Batson describes CIBC's participation in numerous deals with the disgraced energy trader, including some that were apparently done on a "trust-me" basis. The bank has declined to comment on the specifics of the report, but has said its own investigation has uncovered no evidence of illegal or unethical activity by any of its employees.
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