CIBC Q1 profit beats analyst expectations

CIBC chief executive Victor Dodig credited the fast-paced mortgage market and new cash-back reward credit cards as factors behind the bank’s better-than-expected first-quarter profit growth, as the bank also slashed its provisions for credit losses despite the ongoing Covid-19 pandemic.

Dodig also said Thursday the bank had record flows into its mutual fund sales business, as the bank beat analyst expectations, reporting its first-quarter profit grew compared with a year ago before the pandemic started.

On an adjusted basis, CIBC says it earned $3.58 per diluted share, up from $3.24 per diluted share in the same quarter last year. Analysts on average had expected an adjusted profit of $2.81 per share, according to financial data firm Refinitiv.

Provisions for credit losses amounted to $147 million, down from $261 million a year ago, as the bank improved its economic outlook. Canada’s other big banks this week announced similar reductions after increasing the amounts aside for bad loans last year in case the pandemic drove borrowers to default.

“Overall, government support programs continue to help blunt the economic impacts of the pandemic, and our clients continue to exhibit disciplined behaviour in view of the economic uncertainty,” said Shawn Beber, the CIBC’s chief risk officer, on a conference call with analysts.

The bank said Thursday that nearly two thirds of its outstanding loans are to consumers, the majority of which are mortgages. Beber said that the bank has seen lower insolvencies over the past two quarters amid government supports and bank relief programs, but that there has been a slight uptick from fourth-quarter lows. The bank is expecting some clients who had deferred credit card and personal loan payments last year may become delinquent and lead to some losses in the second quarter, Beber said.

Dodig noted that the quicker reopening of the economy in the U.S. has benefited CIBC’s commercial lending business there, and that the bank is hoping for a similar uptick in Canada.

“I think the speed of the U.S. recovery has surprised over the last few months. Most of Canada’s kind of mid-market and even smaller businesses to growth was coming from the U.S. Entrepreneurs are optimists. They see the U.S. opening they’re ready to go,” said Jon Hountalas, who leads the bank’s commercial banking and wealth management teams in Canada.

Laura Dottori-Attanasio, who leads personal and business banking, added that small businesses are “managing very prudently, holding on to their dollars and monies they’ve received from the government, as many wait for the economy to reopen.”

Overall, the big bank says it earned net income of $1.63 billion or $3.55 per diluted share for the quarter ended Jan. 31, up from $1.21 billion or $2.63 per diluted share a year earlier.

Revenue totalled $4.96 billion, up from $4.86 billion.

Dodig said that the bank has been focused over the past five years on streamlining operations and “eliminating inefficiencies” to cut costs. But he also said that the bank is reinvesting its cost savings to give more resources to the “revenue generating workforce,” support deep client relationships and referrals, and add new leaders to the bank’s Canadian consumer franchise team.

“We know that the economic recovery won’t be a straight line,” said Dodig on the conference call. “We remain very connected to how the pandemic is affecting the lives of our clients and our team. Their well being remains our top priority.”

The Canadian Press

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