CIBC profit jumps, beats expectations; unveils stock buyback

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Canadian Imperial Bank of Commerce's $890-million third-quarter profit is the bank's best ever, marking strength across a number of its business lines.

The earnings amounted to $2.16 per share, slightly beating analyst expectations – making CIBC the fourth straight bank to do so this reporting season. The profit resulted in a 8-per-cent jump from the same period in 2012.

After stripping out one-time items, CIBC made $943-million, or $2.29 per share, far surpassing expected adjusted earnings of $2.13 per share.

The bank kept its dividend unchanged, but announced plans to buy back up to eight million shares.

CIBC did not announce any progress in its talks with Toronto-Dominion Bank to divvy up its Aeroplan credit cards but said those discussions continue.

CIBC has revamped some of its key Canadian operations over the past year to retool for the future.

In June 2012 the bank announced that it would wind down its brokered mortgage business, FirstLine, after it failed to find a buyer for the brand.

Under the FirstLine model, CIBC paid brokers fees for finding new mortgage clients. By scrapping this business and bringing in new mortgages on its own, the bank expects to earn better margins. However, the change came with risk because brokers can be a reliable source of new business – something Bank of Montreal realized after it ended its own brokered mortgage business a few years ago.

CIBC is also in the midst of renegotiating the terms of a long-term arrangement the lender has had with Aimia Inc., the parent company of Aeroplan. The lender's contract with Aimia, which designates CIBC as the primary issuer of Aeroplan credit cards, ends on Dec. 31. The two parties have held heated discussions for the past few months and the bank took the fight public in May by threatening to abandon the relationship during its last quarterly conference call. CIBC suggested it would launch a new credit card with $50-million it has earmarked to market the new offering.

Aimia raised the stakes in June when it signed a 10-year deal with Toronto-Dominion Bank to make TD its new primary card issuer. A few weeks later TD and CIBC said they were in talks to negotiate a three-way partnership with Aimia, which could result in both banks being able to issue Aeroplan-branded credit cards come 2014. Those discussions are ongoing.