The CIBC has set aside more money for bad loans

The money earmarked for potential loan losses amounted to $ 243 million, compared with a reversal of credit losses that amounted to $ 99 million in the third quarter of last year. (Photo: The Canadian Press)

Toronto – The CIBC reported lower profits on Thursday than the same period last year as it set aside more money for potentially bad loans due to rising interest rates.

The bank posted net income of $ 1.67 billion in the third quarter, down from $ 1.73 billion in the same quarter last year, as it posted losses in its Personal and Small Business Banking divisions in Canada, Corporate and Wealth Management in the United States and Capital Markets.

The money earmarked for potential loan losses amounted to $ 243 million, compared with a reversal of credit losses that amounted to $ 99 million in the third quarter of last year.

So far all reporting banks have increased their loan reserves as the economic outlook worsens due to the central bank’s hike in interest rates, which has led to a slowdown in inflation, although CIBC has recorded a smaller increase in provisions than other banks this quarter, as it was the only one to increase provisions in the last quarter.

Revenue of $ 5.57 billion was up from $ 5.06 billion in the same quarter last year thanks to growth across the bank, chief executive Victor Dodig said during a briefing Thursday.

“The results were driven by organic growth across all of our businesses,” he said.

CIBC has invested heavily in customer acquisition, including through a rebranding and purchase of the Costco credit card portfolio, which helped increase spending by 9% over the previous year and 2% over the previous quarter .

The strategy has seen the bank add more than 300,000 customers in the past year, while the nearly 4,000 employees who specialize in creating business with wealthy and wealthy clients have helped ensure that around 25% of additions fall into the affluent category, Dodig added. .

The CIBC also pointed out that the acquisition of the Costco portfolio will result in more customers, with around 20,000 affiliates so far, said Laura Dottori-Attanasio, parent company, Personal and Small Business Banking, Canada.

“We are only five months away from the start, but we are really happy with our momentum,” he said.

CIBC said its personal and small business banking businesses in Canada earned $ 595 million, up from $ 642 million in the same quarter last year, while its commercial banking and wealth management businesses in Canada earned $ 484 million. , compared to $ 470 million.

The bank saw a 12% increase in loan balances from a year ago in the personal and corporate sectors, of which 1% related to Costco.

Shawn Beber, chief risk officer, said that on the mortgage front, approximately $ 19 billion of fixed-rate mortgages and $ 7 billion of adjustable-rate mortgages need to be renewed in the next 12 months, but that only a relatively small fraction are customers. who are seen as having a higher credit risk and have a high loan-to-value ratio on their mortgages.

The bank’s US Corporate and Wealth Management arm earned $ 193 million, up from $ 266 million a year ago. CIBC’s capital markets activity brought in $ 447 million, down from $ 491 million in the same quarter last year.

The bank said its net income was $ 1.78 per share for the quarter ended July 31, compared with $ 1.88 per share a year earlier. On an adjusted basis, CIBC claimed to have earned $ 1.85 per share, compared to adjusted earnings of $ 1.96 per share a year ago.

Analysts on average had expected adjusted earnings of $ 1.83 per share, according to financial market data firm Refinitiv.

The pace of earnings was partly linked to strong growth in commercial loans, Barclays analyst John Aiken noted in a statement.

“As CIBC executes its strategy, it continues to deliver strong loan growth, with internal margin expansion,” he concluded.

Leave a Comment