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A CIBC sign is shown in the financial district in Toronto on Tuesday, Aug. 22, 2017.Nathan Denette/The Globe and Mail

Canadian Imperial Bank of Commerce is considering listing its Caribbean banking subsidiary on U.S. stock markets, seeking options to redeploy resources away from a region that has been known as a risky place to do business.

Canada's fifth-largest bank has a long history in the Caribbean, with interests in Barbados and Jamaica dating back to the 1920s, and now owns nearly 92 per cent of FirstCaribbean International Bank. But CIBC has more recently turned the focus of its international strategy to the United States, where it acquired Chicago-based PrivateBancorp Inc. for $5-billion (U.S.) earlier this year.

The prospect of publicly listing FirstCaribbean, a Barbados-based lender that does business in 17 countries, is still a work in progress. But it would provide a new way for FirstCaribbean to raise funds, freeing CIBC to redirect capital to other priority areas across North America. Reuters first reported the possibility that CIBC might list its Caribbean arm in New York.

"FirstCaribbean is considering a potential stock market listing in the U.S., the world's deepest capital market," said CIBC spokeswoman Caroline Van Hasselt, in an e-mailed statement.

"While no decisions have been made, such a listing would provide CIBC FirstCaribbean with access to a larger investor base, enhanced liquidity, and greater access to capital to support long-term growth."

Caribbean banking has suffered from a challenging economic environment of late, compounded by a recent series of hurricanes that battered the region's infrastructure, adding to CIBC's loan losses. And at times, the region has proven to be a reputational minefield for some banks, prompting other lenders such as Royal Bank of Canada to pull out, though Bank of Nova Scotia maintains a robust Caribbean presence.

In recent years, CIBC was rumoured to have considered selling its Caribbean unit, but reportedly struggled to find interested buyers. Instead, CIBC began restructuring FirstCaribbean in 2013, and took a $420-million (Canadian) goodwill writedown in 2014, while setting aside $123-million to cover soured loans. Further restructuring charges followed in 2015, by which point the bank had cut its work force by roughly 15 per cent and consolidated back offices.

Under current chief executive officer Gary Brown, who took over at the start of 2016, FirstCaribbean has made some strides and begun tidying up a once-shaky loan book. The lender now accounts for about a third of CIBC's gross impaired loans, after accounting for more than half only two years ago.

But in the meantime, CIBC's priorities have shifted, prompting a need for flexibility in its capital deployment as it seeks to build a more competitive U.S. footprint on the strength of private banking and wealth management.

The former PrivateBancorp, newly renamed CIBC Bank USA after merging with CIBC, contributed $57-million (U.S.) in profit during the three months that ended Oct. 31, marking one of the best quarterly results the bank has had. But CIBC is in the process of rebuilding its capital levels after the deal, having paid a steep price for PrivateBancorp following a year-long courtship. CIBC's common equity tier 1 (CET1) ratio stood at 10.6 per cent at fiscal year-end, down from 11.3 per cent a year earlier.

In a previous interview, CIBC CEO Victor Dodig said he aims to build "one of the most prominent business banks in North America," with the U.S. arm contributing a quarter of CIBC's profits. And that could require further investments, similar to CIBC's July deal to buy private wealth management firm Geneva Advisors for up to $200-million.

The option to pursue a public listing of FirstCaribbean would open an avenue through which CIBC could gradually reduce its stake or leave the Caribbean altogether. But there's no guarantee a public listing would signal a hard exit.

"We continuously review our business and if and when decisions are made, they may be subject to regulatory approvals, and stakeholders are advised as appropriate," Ms. Van Hasselt said.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
BNS-N
Bank of Nova Scotia
+1.51%51.16
BNS-T
Bank of Nova Scotia
+1.4%69.42
CM-N
Canadian Imperial Bank of Commerce
-0.46%50.07
CM-T
Canadian Imperial Bank of Commerce
-0.66%67.9
RY-N
Royal Bank of Canada
+1.26%100.4
RY-T
Royal Bank of Canada
+1.12%136.23

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