CIBC profit falls on higher costs, loan-loss provisions
Dividend hike despite missing expectations
• The Canadian Imperial Bank of Commerce’s profit fell 18 per cent to $1.19 billion in its fiscal fourth quarter as results were dragged down by higher expenses and more money set aside for bad loans.
The bank’s adjusted earnings were $1.31 billion in the three-month period ending Oct. 31, or $1.39 per share, falling short of average analyst expectations of $1.72 per diluted share, according to estimates compiled by financial markets data firm Refinitiv. Despite the miss, CIBC raised its dividend by two cents to 85 cents per share. For the full fiscal 2022 year, CIBC’S net income slipped three per cent to $6.2 billion.
Shares fell as much as six per cent in Toronto on Thursday.
“These results were driven by robust volume growth across all our businesses, which was a direct result of the continued execution of our client-focused strategy and the investments that we’re making and growth which will benefit our business in fiscal 2023 and beyond,” said CIBC president and chief executive Victor Dodig during a Thursday morning conference call following the results.
“With many of our key strategic and compensation-related investments come now completed, we’re now shifting to more moderate expense growth in 2023 to the mid-single digit range,” he added.
The bank, however, saw provisions for credit losses surge to $436 million for the quarter, up $358 million or 459 per cent from the same period last year.
CIBC’S non-interest expenses rose to $1.31 billion, a jump of $161 million since the same time last year primarily because of investments in growth initiatives such as the Canadian Costco credit card portfolio as well as employee raises. The bank had also pointed to rising inflation as another factor driving up costs.
Profit for the Canadian personal and business banking segment dropped 21 per cent to $471 million from last year, while the Canadian commercial banking and wealth management segment’s profit rose six per cent year-over-year to $469 million.
CIBC’S U.S. banking and wealth management segment’s net income fell 43 per cent from last year, to US$116 million. Despite volatile markets, the bank’s capital market segment remained flat year-over-year at $378 million in net income.
John Aiken, senior analyst and head of research at Barclays Bank PLC, said that while CIBC’S strategic investments may help out the bank in 2023, the fourth quarter left much to be desired.
“CIBC had a big miss in the quarter and, while some of it related to higher provisions on performing loans, the bank’s domestic net interest margin contraction was disappointing,” Aiken wrote in a Thursday note to clients following the results. “Further, expenses ticked up and, while the bank is citing strategic investments and some severance, we do not believe that this will be enough to placate the markets.”