Canada’s CIBC reports lower profit on higher expenses, loan-loss provisions

Business

Canadian Imperial Bank of Commerce (CM.TO) on Thursday beat analysts’ estimates for third-quarter profit, which declined from a year earlier as higher expenses and provisions for credit losses outweighed strong lending growth, and as capital markets earnings fell.

Net income, excluding one-off items, fell to C$1.85 per share for the three months ended July 31 from C$1.96 a year earlier.

While total revenue rose 10%, with increases in both interest and trading income, expenses also climbed 10% on an adjusted basis, due to strategic initiatives and inflation.

Expenses rose faster than revenues in its Canadian retail, U.S. commercial and wealth and capital markets businesses.

Canada’s fifth-largest lender look provisions for credit losses (PCL) of C$243 million, compared with a release of PCL a year earlier.

Adjusted pre-tax, pre-provision earnings increased 10%.

Earnings were down 1% in CIBC’s Canadian retail banking business on an adjusted basis, but increased 3% in its commercial and wealth management unit. Both consumer and commercial loan balances posted strong growth.

Although U.S. loan balances also increased, margin fell 13 basis points from a year ago and fell 3 basis points from the previous quarter, leading to a 28% drop in adjusted earnings.

All-bank net interest margin excluding trading rose 4 basis points from the prior quarter.

CIBC’s capital markets business reported a 9% decline in earnings, despite strong growth in trading income as expenses grew at more than double the pace of revenues.

The bank reported an overall net profit of C$1.78 per share, compared with C$1.88 a year earlier.

($1 = 1.2908 Canadian dollars)