CIBC misses expectations amid pullback in mortgage growth
A drop-off in metropolitan housing markets that has been “more pronounced and more prolonged” than anticipated is weighing on mortgage growth at the Canadian Imperial Bank of Commerce.
CIBC, Canada’s fifth-biggest bank, on Wednesday reported a profit of nearly $1.35 billion for its fiscal second quarter, up two per cent from a year ago. However, the bank’s Canadian real estate secured lending portfolio declined 0.9 per cent year-overyear to stand at $223 billion as of April 30.
The bank’s head of personal and small business banking for Canada, Christina Kramer, said a big part of the lender’s strategy over the past few years has been aimed at large urban centres, where booming housing and mortgage markets helped deliver considerable growth for the bank.
But those markets have since cooled, Kramer said, dragging down mortgage growth.
“And that’s due to the market turning out different than we had anticipated, impacting us more than our peers due to our strategic focus,” she said during a conference call. “In the large urban markets, pullback in activity has been more pronounced and more prolonged than we assumed.”
Eight Capital analyst Steve Theriault wrote in a note that CIBC management had been seeing “outsized growth” from urban areas, but that, when it comes to the bank’s real estate secured lending in Canada, “it sounds to us as though any expansion will remain below market levels in 2019.”
Shares of CIBC closed down more than four per cent in Toronto on Wednesday, after the bank also reported adjusted earnings per share for its second quarter of $2.97, just shy of analysts’ estimates.
CIBC president and chief executive Victor Dodig said during the earnings conference call that, given market conditions to date and the bank’s plans to keep investing in its business, the lender expects its year-over-year earnings per share (EPS) growth to be “relatively flat” for its fiscal 2019.
“Longer term, the execution of our strategy will allow us to deliver on all of our financial targets over time, including our medium-term EPS growth target of five to 10 per cent,” Dodig said.