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CIBC’s ambitious plan to win in wealth management

CIBC’s head offices at the corner of King Street West and Bay Street in Toronto.

Fred Lum/Fred Lum/The Globe and Mail

This much we know: Canadian Imperial Bank of Commerce is desperately trying to double down on wealth management, with executives going so far as to say they want 15 per cent of the bank's bottom line to stem from this business.

What we haven't heard are precise details on their plans to do so. Management has outlined broad strategies – focusing on the U.S., for instance – but there hasn't been complete clarity.

That's starting to change. At a wine and cheese gathering with shareholders this week, wealth management head Victor Dodig walked those in attendance through more of the strategy.

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His first key point: don't count Canada out. Although he and his team are certainly looking at the U.S., they think there are gains to be made at home. And these are going to come from expanding the existing franchise through organic growth.

"With few significant assets available domestically, the bank sees the benefits of a tuck-in acquisition as marginal at best," Barclays Capital analyst John Aiken, who hosted the event, wrote in a note to clients.

The domestic strategy, then, is rooted in winning over more of CIBC's existing banking clients. At the moment the lender has weak wealth management penetration with its retail and business banking network, with just 6 per cent overlap, while rival Canadian banks enjoy roughly 20 per cent penetration.

To get in line with its peers, CIBC has unleashed a raft of initiatives, including putting asset specialists in its branch network, to make it easier to cross-sell at these locations; reworking its compensation structure for wealth management advisers; and upgrading its systems and workstations so that it's easier to transfer a client into its wealth platform. The changes likely won't lead to dramatic shifts overnight, but executives hope they will help build a franchise that will grow as more wealth boomers retire and inheritances are created.

South of the border acquisitions have certainly been on management's radar. The hard part is that they're all pricey. "CIBC noted that asset values are now fairly robust, and given the growth opportunities available, the bank does not necessarily have to complete a transaction in the near term," Mr. Aiken wrote.

Careful not to overreach, Mr. Dodig said CIBC is rather content building out its existing U.S. platform, which is comprised of a 41 per cent stake in American Century and the recent acquisition of Atlantic Trust. At the latter, the hope is to bring more retail banking strength to the asset manager, with the hope of winning more wealth management deposits – money that can then be lent out.

"Pursuing deposit and lending opportunities within Atlantic Trust could significantly increase the profitability of that platform and provide additional synergies and growth perhaps not fully recognized by the market," Mr. Aiken noted.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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