CIBC Q2 net income rises 25% year over year

The Canadian Imperial Bank of Commerce reported better-than-expected earnings for its second quarter with a nearly 25% increase in net income, year over year, due to strong results at home and south of the border helped by its U.S. acquisitions last year.

The lender, the first of the large Canadian banks to report its latest results, said Wednesday it earned a profit attributable to common shareholders of $1.29 billion or $2.89 per diluted share for the quarter ended April 30, up from $1.04 billion or $2.59 per diluted share a year ago.

On an adjusted basis, Canada’s fifth-largest bank said it earned $1.32 billion or $2.95 per diluted share for the quarter ended April 30, up from $1.06 billion or $2.64 a year earlier.

Analysts had expected a profit of $2.81 per share, according to Thomson Reuters Eikon.

The bank maintained its dividend of $1.33 per share for the quarter ending July 31, 2018.

Read: Strong Q1 for Canada’s big banks

“In the second quarter, each of our business units performed well,” Victor Dodig, CEO at CIBC, said in a release. “We delivered robust earnings growth with continued progress on our strategy to build a relationship-oriented bank for a modern world with high quality, diversified earnings growth and disciplined expense and capital management.”

The lender’s Canadian personal and small business banking division reported a 16% increase in net income to $584 million. The increase came despite slowing growth in mortgage lending amid tighter regulations, higher interest rates and April national housing sales activity at lows not seen in several years.

CIBC’s spot mortgage balance for the second quarter was $203 billion, up 6.8% from a year ago, but flat compared with the first quarter. By comparison, in the second quarter of 2017, CIBC’s spot mortgage balance was $190 billion, up 12.4% from the previous year and up 2.2% from the previous quarter.

Meanwhile, the lender’s domestic commercial banking and wealth management arm earned $310 million for the quarter, marking a 9% increase from the same period a year ago.

CIBC’s U.S commercial banking and wealth management arm saw a significant jump in net income in the second quarter, climbing 431% year-over-year to $138 million. It was boosted by the acquisition of Chicago-based PrivateBancorp in June last year, later rebranded as CIBC Bank USA. The bank also acquired Chicago-based private wealth management firm Geneva Advisors in the fourth quarter of 2017.

The lender’s capital markets arm, however, saw a 7% decrease in net income to $249 million compared with one year ago “primarily due to higher non-interest expenses and a higher effective tax rate, partially offset by higher revenue.”

The bank’s provisions for credit losses, or money set aside for bad loans, was $212 million, up $33 million or 18% from the second quarter of 2017. CIBC said this was primarily due to an increase on provisions on impaired loans due to the inclusion of the results of CIBC Bank USA. As well, this marked the second quarter that reflects a new accounting standard that puts a greater emphasis on a bank’s expected losses over the life of the loan, and in turn, introduces more volatility to the measure.

The bank’s common equity tier 1 ratio, a key measure of the bank’s financial health, was 11.2%, up from 10.8% in the previous quarter but down from 12.2 a year ago.

Gabriel Dechaine, an analyst with National Bank of Canada Financial Markets, said CIBC’s latest quarterly results were positive with “exceptional results” in Canadian personal and commercial banking.

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