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Canadian Imperial Bank of Commerce plans to close at least 60 branches this year as part of its campaign to shave annual expenses by $500-million and reposition itself for what chairman John Hunkin calls "the new financial services world."

In the first quarter alone, the bank closed 30 branches across Canada, leaving it with 1,265. All of the cuts were made in urban centres, including downtown Toronto where there were 20 CIBC branches in a six-block area, bank spokeswoman Susan McDougall said yesterday.

The bank has not announced how many other branches it plans to close this year, chief financial officer John Doran said in response to questions from analysts this week. "But I think it's fair to say it will be at least double the 30 number."

There are two trends driving CIBC to reduce its branch network: branches are expensive to operate so they put pressure on profit margins; and customers are increasingly switching to electronic channels to do their banking, including telephones, the Internet and automated banking machines.

The number of telephone banking customers at CIBC has grown 35 per cent to 2.1 million year over year, Mr. Hunkin told shareholders at the bank's annual meeting in Calgary this week. As well, the bank has added 304 automated banking machines to its network, bringing the total to 4,316. At the same time, however, branch transactions are down by almost 40 per cent.

But these changes in the way customers do their banking do not mean branches will become extinct. "There will always be CIBC branches, but their function, form and location will evolve as customer needs evolve," Mr. Hunkin told shareholders.

He and other bank executives were asked during the conference call why the bank's profits from retail banking are so low and whether that is what is driving the bank to form alliances with grocers.

CIBC offers President's Choice Financial Banking services across Canada through its alliance with Loblaw Cos. Ltd. and is looking to forge deals with U.S. grocers.

Mr. Doran said the bank does not generate much of a profit from 80 per cent of its retail customers -- the ones he described a "convenience" customers. By comparison, margins are much better from its well-heeled customers who typically use many more services at the bank.

"The real challenge and the biggest challenge is that broad mass of customer base," Mr. Hunkin told analysts. "That's the tough nut to crack. That's the toughest one to try to fix."

CIBC's profit climbed 34 per cent in the first quarter to $451-million. But earnings from retail and small-business banking rose only 5 per cent to $87-million. The big profit generator was wealth management -- mutual funds as well as the bank's full-service and discount brokerage operations. Profit in this area more than doubled to $141-million.

CIBC is by no means the only major bank on a cost-cutting mission. Both Royal Bank of Canada and Toronto-Dominion Bank have announced job cuts.

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