PrivateBank purchase boosts CIBC after strong U.S. results

Another earnings season for Canada’s biggest banks kicked off Thursday, with Canadian Imperial Bank of Commerce reporting that business in the United States picked up as mortgage growth at home slowed down.

Toronto-based CIBC, Canada’s fifth-largest lender, announced net income of nearly $1.33 billion for the quarter ended Jan. 31, down from approximately $1.41 billion for the same period a year ago.

CIBC’s first quarter, however, reflected one-time items such as a $299-million gain on the sale and leaseback of retail properties the bank had realized for last year’s first quarter, and a $88-million charge tied to U.S. tax reforms that were booked for this year’s quarter.

The bank’s focus on the U.S. helped it overall. CIBC reported $134 million in net income from its U.S. commercial banking and wealth management unit for the first quarter of 2018, an increase of $105 million — or 362 per cent — from last year’s first quarter.

The U.S.-based earnings for CIBC were driven by the bank’s $5-billion purchase of Chicago-based PrivateBancorp Inc., and its subsidiary, The PrivateBank, in June 2017. The PrivateBank was rebranded as CIBC Bank USA.

“One of the reasons that we invested in The PrivateBank was to get diversification, and clearly that’s paying off,” said Kevin Glass, senior executive vice-president and chief financial officer of CIBC.

As business south of the border improved, CIBC said Thursday that mortgage balances grew by about one per cent from the previous quarter, and about nine per cent compared to the same period last year, pushing the total up to approximately $203 billion. Originations of new mortgages fell to $9 billion for the first quarter, from $12 billion a year ago.

The pace was a relatively slower one for CIBC, which reported a year-over-year increase in its mortgage balances of about 12 per cent for the first quarter of 2017.

“We have seen mortgage growth slowing, but that’s largely an industry slowing, and also a slowing that’s been guided to some time ago, in terms of our sales force and the maturing of our mortgage sales force,” Glass said.