Canadian Imperial Bank of Commerce suffered a 6-per-cent dip in fourth-quarter profit as the bank earmarked large sums of money to cover potential loan losses.
Adjustments to economic forecasts and an expected loss on a loan in the commercial and personal banking business drove a 52-per-cent rise in provisions for credit losses, to $402-million.
All of Canada's largest banks increased loan loss provisions in the fiscal fourth quarter, as credit portfolios bounced back from unusually benign levels last year and banks are brace for slower economic growth in 2020. But the magnitude of CIBC's increase stood out, driven by large and idiosyncratic items.
CIBC's share price fell 5.3 per cent in early trading on the Toronto Stock Exchange on Thursday.
In the three months that ended Oct. 31, CIBC earned $1.19-billion, or $2.58 per share, compared with $1.27-billion, or $2.80 per share a year earlier.
Adjusted to include certain items, including a $135-million goodwill writedown from the bank's sale of a controlling stake in its Caribbean subsidiary, CIBC said it earned $2.84 per share. That was far shy of the $3.06 per share consensus estimate among analysts, according to Refinitiv.
"We did not deliver want we wanted to deliver to our shareholders, and we are focused on getting the bank back to earnings growth in 2020."
CIBC held its quarterly dividend steady at $1.44 per share.
Profit in CIBC's core Canadian retail banking division fell 10 per cent to $601-million, compared with a year earlier, due in large part to a $64-million rise in loan loss provisions. But even excluding provisions, profit would have been down slightly year over year, as loan balances remained flat.
Canadian commercial banking and wealth management profit fell 8 per cent to $306-million, despite strong loan and deposit growth. Most of the decline was due to a single $52-million provision related to fraud, which the bank described as isolated but declined to discuss in detail.
U.S. commercial banking and wealth management was a bright spot, with profit up 37 per cent to $180-million, as CIBC continues to build on its 2017 acquisition of Chicago-based PrivateBancorp Inc., which has since been rebranded CIBC Bank USA. Profit grew inspite of narrower lending margins as a result of interest rate cuts by the U.S. Federal Reserve.
Capital markets posted a modest 3-per-cent decline in profit in a difficult quarter across the banking sector. Better revenue from global markets, corporate banking and debt underwriting was offset by lower advisory revenue.
CIBC also announced that Charles Brindamour, the CEO of insurance company Intact Financial Corp., will join the bank’s board of directors in February.
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James Bradshaw