CIBC eyes U.S. growth as PrivateBancorp deal closes
Will help offset slower growth at home
• The Canadian Imperial Bank of Commerce i s pushing ahead with its ambitions in the United States now that it has completed its $ 5 billion acquisition of Chicago- based PrivateBancorp Inc., focusing first on organic growth but leaving the door open to “geographic regional expansion in logical places” and potential “tuck- in acquisitions as they appear.”
CIBC’s largest acquisition to date closed Friday — after two sweetened bids — giving Canada’s fifth- biggest lender some much- coveted exposure to growth south of the border as the economy at home slows.
As CIBC integrates itself with PrivateBancorp, a com- mercial and private bank with a national presence but a large footprint in the Chicago area, the U. S. region will operate under a unified CIBC brand, the companies said.
“The predominant focus is organic growth,” CIBC chief executive Victor Dodig said in a phone interview from Chicago. “It doesn’t mean that we won’t look at tuck- in acquisitions as they appear. Those would likely be in the wealth management space. And growing banking inorganically, that’s something that would happen over the medium to long term.”
Larry Richman, chief executive of PrivateBancorp, who will now take on the role of group head of the U.S. region, said its focus is “market share growth.”
However, there may be opportunity in areas where PrivateBancorp, which operates as PrivateBank, and CIBC’s Atlantic Trust franchise, a U. S. private-wealth manager for high- net- worth clients purchased in 2014, overlap, Richman added.
“It may and likely will include some geographic regional expansion in logical places where we can leverage the client- base capabilities,” Richman said from Chicago. “Because as you see the combination in the United States where PrivateBank is and CIBC Atlantic Trust, provides some logical places for us to leverage the business lines and capabilities together.”
PrivateBank has 36 locations in the U. S., 21 of which are in the Chicago area, and others in cities including Miami, Cleveland and Kansas City. Atlantic Trust has 14 offices, including in New York, Boston and San Francisco. Both have offices in Denver, Atlanta, and Chicago.
Acquiring PrivateBancorp was “foundational” for CIBC and a key part of its long- term strategy, Dodig said. But it took two sweetened bids — which worked out to be an extra US$ 8.40 per share of PrivateBancorp common stock — and a few more months, as it was originally expected to close during the lender’s fiscal first quarter this year.
Asked about the addi- tional difficulties in securing the deal for CIBC, which had the smallest international footprint among its peers, Dodig said that even with the increased cost from the original $ 3.8 billion overall price tag, it will still be accretive for shareholders in year three after the recent shift in the U. S. interest rate environment.
“We f eel partic ularly good because the long- term prospects for growth now at CIBC have been secured,” he said, adding that with the acquisition, the bank is aiming to bump up the proportion of earnings generated in the U.S. from 5 per cent to 10 per cent in the short term, and to 25 per cent in the medium term.
Still, a target of 25 per cent of profits generated in the U. S. by 2024 as Dodig has previously forecast, is “very aggressive,” said James Shanahan, an analyst with Edward Jones based in St. Louis. However, with highly indebted consumers and slowing economic growth at home in Canada, those dynamics might make that goal easier to attain, he added.
“To achieve t hat t arget that target in six years, there would have to be rapid growth in the U. S.,” said Shanahan. “But the main reason why it might be achievable is the growth in the much, much larger Canadian business is in the low-single digits, potentially.”