CIBC profit grows despite mortgage slowdown

Q3 earnings beat estimates, bank raises dividend

TORONTO • CIBC’S prediction of a mortgage slowdown has come true.

Mortgage balances rose 2.5 per cent to $208.5 billion in the fiscal third quarter from a year earlier, the bank said Thursday in announcing earnings that beat analysts’ estimates.

That’s the slowest in more than four years and about one-fifth the pace of a year ago. The deceleration ends CIBC’S three-year streak of outpacing Canada’s other large lenders on mortgage growth. RBC said this week that mortgage balances were 5.9 per cent higher than a year earlier.

CIBC executives said in May that domestic loan growth would “moderate” in the second half of the year, with Canadian banking head Christina Kramer estimating it would fall to “low-singledigits” by year-end. Her forecast was less than Canada’s other big lenders, which have maintained “mid-singledigit” growth expectations for the year.

Despite the mortgage slowdown, CIBC posted a 16 per cent jump in Canadian personal and commercial banking earnings due to a “significant” expansion of deposit margins and growth in credit cards and unsecured loans amid rising interest rates, chief financial officer Kevin Glass said.

“Mortgages are a key product for us — it’s very important from a client relationship perspective — but it’s not a high margin product, so if mortgages come off it has a far smaller impact than rate increases do, for instance.”

CIBC has the greatest relative exposure to Canada’s housing market, with a higher percentage of earnings coming from domestic personal and commercial banking than its bigger rivals.

CIBC’S growth has cooled since it stopped expanding its team of mobile-mortgage advisers that fuelled a surge in home-loan balances, with year-over-year growth peaking last year at around 12 per cent. Government measures to slow Canada’s heated housing market, including tougher mortgage-qualification rules imposed in January, have also affected demand.

Net income for the quarter rose 25 per cent to $1.37 billion, or $3.01 a share, from $1.1 billion, or $2.60, a year earlier, CIBC said in a statement. Adjusted profit, which excludes some items, was $3.08 a share, compared with the $2.93 average estimate of 14 analysts surveyed by Bloomberg. The bank increased its quarterly dividend 2.3 per cent to $1.36 a share.

The stock has gained 0.2 per cent this year, compared with the 2.4 per cent advance of the eight-company index.