CIBC profit grows de­spite mort­gage slow­down

Calgary Herald - - FINANCIAL POST - DOUG ALEXAN­DER

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-sin­gle-dig­its” by year-end. Her fore­cast was less than Canada’s other big len­ders, which have main­tained “mid-sin­gle-digit” 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 eight­com­pany in­dex.

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