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CIBC buys Atlantic Trust from Invesco for $210-million

CIBC buys Atlantic Trust Private Wealth Management for $210-million

Michelle Siu/The Globe and Mail

Canadian Imperial Bank of Commerce's slow return to growth mode has taken another step with the $210-million (U.S.) purchase of a network of brokers serving wealthy investors in the United States.

CIBC is buying Atlantic Trust Private Wealth Management from Invesco Ltd., giving the Canadian bank a team of 235 people managing assets of about $20-billion from offices in a dozen U.S. metropolitan areas, including Atlanta, Boston, Chicago and New York.

After years of shedding businesses to lower its risk, CIBC has set its sights on the U.S. wealth management business as a fruitful area for expansion. Almost two years ago, it laid out $848-million for a stake in American Century Investments, giving the bank entrée to the business of selling funds to U.S. investors. This latest transaction will give CIBC an operation that advises individual investors who have an average of more than $5-million in assets, a fast growing part of the market. Further acquisitions are a possibility.

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"We have a very strong position in the Canadian market, the natural extension was to look south of the border," said Victor Dodig, senior executive vice-president and group head for wealth management at CIBC. "We like the U.S. market because high net worth clients in the U.S. account for 40 per cent of all high net worth globally."

He noted that the U.S. also accounts for a large portion of the growth in the global business of managing wealthy investors' money. Atlantic Trust has had 23 straight quarters where clients have entrusted the company with more money

Still, some analysts questioned the transaction. John Aiken of Barclay's said in a note that the high net worth segment is attractive, but shareholders may be concerned about a bigger move into the United States, where CIBC has had problems before. He suggested the money might be better given to shareholders via dividends or buybacks.

"Questions may arise about whether this could lead to a back-door re-entry into broader full service brokerage at some point down the road, which got CIBC into trouble in the past," Mr. Aiken wrote. "Given the fact that CIBC has retrenched in Canada for the bulk of its remaining business segments, we would much prefer a strategy that returns capital to shareholders."

Mr. Dodig said he does not expect shareholders will be surprised, as the bank has consistently been saying it wants to add to the portion of its earnings that comes from wealth management.

In Canada, where the bank has a network of brokers under the CIBC Wood Gundy brand as well as fund management operations, it is likely to be organic expansion.

In the United States, American Century and Atlantic Trust could be the first of more purchases. "If those properties are available at a good price that makes sense for our shareholders then we would look at those," Mr. Dodig said.

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