Strong earnings in Q3 on solid revenue growth.
TORONTO, Aug. 25, 2016 /CNW/ - CIBC (TSX: CM)
(NYSE: CM) today announced its financial results for the third
quarter ended July 31, 2016.
Third quarter highlights
- Reported net income was $1,441
million, compared with $978
million for the third quarter a year ago, and $941 million for the prior quarter.
- Adjusted net income(1) was $1,072 million, compared with $990 million for the third quarter a year ago,
and $962 million for the prior
quarter.
- Reported diluted earnings per share (EPS) was $3.61, compared with $2.42 for the third quarter a year ago, and
$2.35 for the prior quarter.
- Adjusted diluted EPS(1) was $2.67, compared with $2.45 for the third quarter a year ago, and
$2.40 for the prior quarter.
- Reported return on common shareholders' equity (ROE) was
26.8% and adjusted ROE(1) was 19.8%.
"Our strong results this quarter were broad based, as each of
our Retail and Business Banking, Wealth Management and Capital
Markets business units performed well," says Victor G. Dodig, CIBC President and Chief
Executive Officer. "We continue to pursue and make progress against
our strategy of building a strong, innovative and
relationship-oriented bank while delivering consistent and
sustainable financial results for our shareholders."
Results for the third quarter of 2016 were affected by the
following items of note aggregating to a positive impact of
$0.94 per share:
- $428 million ($383 million after-tax) gain, net of related
transaction costs, on the sale of our minority investment in
American Century Investments (ACI);
- $40 million ($30 million after-tax) of loan losses in our
exited European leveraged finance portfolio;
- $28 million ($21 million after-tax) gain from the structured
credit run-off business; and
- $7 million ($5 million after-tax) amortization of intangible
assets.
At July 31, 2016, CIBC's Basel III
Common Equity Tier 1, Tier 1 and Total capital ratios were 10.9%,
12.4% and 14.4%, respectively, on an all-in basis compared with
10.4%, 11.9% and 13.9%, respectively, at the end of the prior
quarter. CIBC's Basel III leverage ratio at July 31, 2016 was 3.9% on an all-in basis.
On June 29, 2016, CIBC announced
that it had entered into a definitive agreement to acquire
PrivateBancorp, Inc. (NASDAQ: PVTB) and its subsidiary, The
PrivateBank, a high-quality Chicago-based middle market commercial bank
with private banking and wealth management capabilities. This
transaction is expected to close in the first calendar quarter of
2017, subject to customary closing conditions, regulatory approvals
and the approval of PrivateBancorp's common shareholders. Upon
closing, CIBC expects to maintain a Common Equity Tier 1 ratio of
at least 10% on an all-in basis.
Core business performance
Retail and Business
Banking reported net income of $666
million for the third quarter, up $36
million or 6% from the third quarter a year ago. Solid
volume growth and higher fees were partially offset by a higher
provision for credit losses due to increased write-offs in cards
and personal lending, and higher spending on strategic
initiatives.
Retail and Business Banking continued to make progress against
our objectives of leadership in profitable revenue growth and
client experience. During the third quarter of 2016:
- CIBC was recognized for the third year in a row for its
continued leadership in mobile banking, achieving the top overall
score among the five largest Canadian banks in the Forrester
Research 2016 Canadian Mobile Functionality Benchmark; and
- Chequing account opens reached their highest quarterly level in
over 10 years as a result of the successful launch of the
innovative CIBC SmartTM account.
Wealth Management reported net income of $506 million for the third quarter, which
included the gain of $383 million,
net of transaction costs, on the sale of our minority investment in
ACI, identified as an item of note. Excluding items of note,
adjusted net income(1) was $126
million, down $17 million or
12% from the third quarter a year ago, as we ceased recognizing
income from ACI following the announcement of the sale in
December 2015. Total retail brokerage
revenue was also lower as a result of a decline in transaction
volume. These factors were partly offset by higher revenue due to
growth in average assets under management and seed capital gains in
asset management.
During the third quarter of 2016, Wealth Management continued
its progress in support of our strategic focus to enhance client
experience, drive asset growth, and simplify our business
platform:
- We expanded our CIBC Personal Portfolio Services offer with
three new Income Generation Portfolios; and
- We launched e-statements for CIBC Personal Portfolio Services
and CIBC Mutual Fund accounts, further simplifying investment
statement management for clients.
Capital Markets reported net income of $304 million for the third quarter, up
$39 million or 15% from the third
quarter a year ago. Excluding items of note, adjusted net
income(1) was $313
million, up $43 million or
16%, primarily due to higher revenue, partially offset by a higher
provision for credit losses and higher expenses. Higher revenue
from interest rate and equity derivatives trading, corporate
banking, and equity and debt issuance activity was partly offset by
lower revenue from our U.S. real estate finance business.
As a leading capital markets franchise in Canada that is also active in select
industries in the rest of the world, Capital Markets acted as:
- Financial advisor and co-underwriter to Lowe's Companies Inc.
on its $3.2 billion acquisition of
RONA Inc.;
- Bookrunner on Suncor's $2.9
billion bought common share offering, one of the
largest-ever bought deals in Canada;
- Financial advisor, sole underwriter, bookrunner and lead
arranger on $1.8 billion in credit
facilities, lead and joint bookrunner on $525 million of subscription receipts, and sole
foreign exchange provider relating to Stantec Inc.'s acquisition of
MWH Global;
- Financial advisor, co-underwriter, joint bookrunner and co-lead
arranger on $925 million in credit
facilities primarily used to support Cheung Kong Infrastructure
Holdings Limited's and Power Assets Holdings Limited's acquisition
of a 65% interest in certain midstream assets from Husky Energy
Inc.; and
- Advisor on Teine Energy's $975
million acquisition of Penn West oil assets in Southwestern Saskatchewan.
(1)
|
For additional
information, see the "Non-GAAP measures" section.
|
Credit quality
Provision for credit losses was
$243 million. Excluding the loss in
our exited European leveraged finance portfolio, identified as an
item of note, the provision for credit losses was $203 million, up $14
million or 7% from the same quarter last year. This increase
was primarily driven by higher write-offs in the card and personal
lending portfolios.
Non-GAAP measures
We use a number of financial
measures to assess the performance of our business lines. Some
measures are calculated in accordance with GAAP (IFRS), while other
measures do not have a standardized meaning under GAAP, and
accordingly, these measures may not be comparable to similar
measures used by other companies. Investors may find these non-GAAP
measures useful in analyzing financial performance. For a more
detailed discussion on our non-GAAP measures, see page 13 of our
2015 Annual Report. The following table provides a reconciliation
of non-GAAP to GAAP measures related to CIBC on a consolidated
basis.
|
|
|
For the
three
|
|
|
For the
nine
|
|
|
|
|
months
ended
|
|
|
months
ended
|
|
|
|
|
|
2016
|
|
|
2016
|
|
|
2015
|
|
|
|
2016
|
|
|
2015
|
|
$ millions, except
per share amounts
|
|
|
|
Jul.
31
|
|
|
Apr. 30
|
|
|
Jul. 31
|
|
|
|
Jul.
31
|
|
|
Jul. 31
|
|
Reported and
adjusted diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
attributable to common shareholders
|
A
|
|
$
|
1,426
|
|
$
|
926
|
|
$
|
962
|
|
|
$
|
3,320
|
|
$
|
2,764
|
|
After-tax impact of
items of note (1)
|
|
|
|
(369)
|
|
|
21
|
|
|
12
|
|
|
|
(301)
|
|
|
58
|
|
Adjusted net income
attributable to common shareholders (2)
|
B
|
|
$
|
1,057
|
|
$
|
947
|
|
$
|
974
|
|
|
$
|
3,019
|
|
$
|
2,822
|
|
Diluted
weighted-average common shares outstanding (thousands)
|
C
|
|
|
395,328
|
|
|
395,150
|
|
|
397,828
|
|
|
|
395,975
|
|
|
397,830
|
|
Reported diluted EPS
($)
|
A/C
|
|
$
|
3.61
|
|
$
|
2.35
|
|
$
|
2.42
|
|
|
$
|
8.38
|
|
$
|
6.95
|
|
Adjusted diluted EPS
($) (2)
|
B/C
|
|
|
2.67
|
|
|
2.40
|
|
|
2.45
|
|
|
|
7.62
|
|
|
7.09
|
|
Reported and
adjusted return on common shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common
shareholders' equity
|
D
|
|
$
|
21,198
|
|
$
|
20,899
|
|
$
|
18,733
|
|
|
$
|
21,111
|
|
$
|
18,431
|
|
Reported return on
common shareholders' equity
|
A/D
|
(3)
|
|
26.8
|
%
|
|
18.0
|
%
|
|
20.4
|
%
|
|
|
21.0
|
%
|
|
20.0
|
%
|
Adjusted return on
common shareholders' equity (2)
|
B/D
|
(3)
|
|
19.8
|
%
|
|
18.4
|
%
|
|
20.6
|
%
|
|
|
19.1
|
%
|
|
20.5
|
%
|
|
Retail and
|
|
|
|
|
|
Business
|
Wealth
|
Capital
|
Corporate
|
CIBC
|
$ millions, for the
three months ended
|
Banking
|
Management
|
Markets
|
and Other
|
Total
|
2016
|
Reported net
income (loss)
|
$
|
666
|
$
|
506
|
$
|
304
|
$
|
(35)
|
$
|
1,441
|
Jul.
31
|
After-tax impact
of items of note (1)
|
|
1
|
|
(380)
|
|
9
|
|
1
|
|
(369)
|
|
Adjusted net
income (loss) (2)
|
$
|
667
|
$
|
126
|
$
|
313
|
$
|
(34)
|
$
|
1,072
|
2016
|
Reported net income
(loss)
|
$
|
652
|
$
|
113
|
$
|
252
|
$
|
(76)
|
$
|
941
|
Apr. 30
|
After-tax impact of
items of note (1)
|
|
(29)
|
|
2
|
|
8
|
|
40
|
|
21
|
|
Adjusted net income
(loss) (2)
|
$
|
623
|
$
|
115
|
$
|
260
|
$
|
(36)
|
$
|
962
|
2015
|
Reported net income
(loss)
|
$
|
630
|
$
|
140
|
$
|
265
|
$
|
(57)
|
$
|
978
|
Jul. 31
(4)
|
After-tax impact of
items of note (1)
|
|
2
|
|
3
|
|
5
|
|
2
|
|
12
|
|
Adjusted net income
(loss) (2)
|
$
|
632
|
$
|
143
|
$
|
270
|
$
|
(55)
|
$
|
990
|
|
$ millions, for the
nine months ended
|
|
|
|
|
|
|
|
|
|
|
2016
|
Reported net
income (loss)
|
$
|
2,002
|
$
|
738
|
$
|
800
|
$
|
(176)
|
$
|
3,364
|
Jul.
31
|
After-tax impact
of items of note (1)
|
|
(26)
|
|
(375)
|
|
21
|
|
79
|
|
(301)
|
|
Adjusted net
income (loss) (2)
|
$
|
1,976
|
$
|
363
|
$
|
821
|
$
|
(97)
|
$
|
3,063
|
2015
|
Reported net income
(loss)
|
$
|
1,858
|
$
|
396
|
$
|
776
|
$
|
(218)
|
$
|
2,812
|
Jul. 31
(4)
|
After-tax impact of
items of note (1)
|
|
(29)
|
|
12
|
|
6
|
|
69
|
|
58
|
|
Adjusted net income
(loss) (2)
|
$
|
1,829
|
$
|
408
|
$
|
782
|
$
|
(149)
|
$
|
2,870
|
(1)
|
Reflects impact of
items of note below.
|
(2)
|
Non-GAAP
measure.
|
(3)
|
Annualized.
|
(4)
|
Certain information
has been reclassified to conform to the presentation adopted in the
first quarter of 2016.
See "External reporting changes" section of our Report to
Shareholders for additional details.
|
Items of note
|
For the
three
|
|
For the
nine
|
months
ended
|
|
months
ended
|
2016
|
2016
|
2015
|
|
2016
|
2015
|
$ millions
|
Jul.
31
|
Apr. 30
|
Jul. 31
|
|
Jul.
31
|
Jul. 31
|
Gain, net of related
transaction costs, on the sale of our minority investment in
ACI
|
$
|
(428)
|
$
|
-
|
$
|
-
|
|
$
|
(428)
|
$
|
-
|
Gain, net of related
transaction and severance costs, on the sale of a processing
centre
|
|
-
|
|
(53)
|
|
-
|
|
|
(53)
|
|
-
|
Gain arising from
accounting adjustments on credit card-related balance sheet
amounts
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
(46)
|
Gain on sale of an
investment in our merchant banking portfolio
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
(23)
|
Loss (income) from
the structured credit run-off business
|
|
(28)
|
|
11
|
|
6
|
|
|
(12)
|
|
26
|
Amortization of
intangible assets
|
|
7
|
|
7
|
|
10
|
|
|
23
|
|
31
|
Increase in legal
provisions
|
|
-
|
|
77
|
|
-
|
|
|
77
|
|
-
|
Increase in
collective allowance recognized in Corporate and Other
(1)
|
|
-
|
|
40
|
|
-
|
|
|
109
|
|
-
|
Loan losses in our
exited European leveraged finance portfolio
|
|
40
|
|
-
|
|
-
|
|
|
40
|
|
-
|
Restructuring charges
primarily relating to employee severance
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
85
|
Pre-tax impact of
items of note on net income
|
|
(409)
|
|
82
|
|
16
|
|
|
(244)
|
|
73
|
|
Income tax impact on
above items of note
|
|
40
|
|
(31)
|
|
(4)
|
|
|
(12)
|
|
(15)
|
|
Income tax recovery
due to the settlement of transfer pricing-related
matters
|
|
-
|
|
(30)
|
|
-
|
|
|
(30)
|
|
-
|
|
Income tax recovery
arising from a change in our expected utilization of tax loss
carryforwards
|
|
-
|
|
-
|
|
-
|
|
|
(15)
|
|
-
|
After-tax impact of
items of note on net income
|
$
|
(369)
|
$
|
21
|
$
|
12
|
|
$
|
(301)
|
$
|
58
|
(1)
|
Relates to the
collective allowance, except for: (i) residential mortgages greater
than 90 days delinquent; (ii) personal loans and scored small
business loans
greater than 30 days delinquent; and (iii) net write-offs for the
cards portfolio, which are all reported in the respective strategic
business units.
|
Making a difference in our Communities
CIBC is
committed to building a bank that is relevant to our clients, our
team members and communities, and supports causes that matter to
them. During the quarter we:
- Joined our clients and communities across Quebec for the Tour CIBC Charles Bruneau, a
4-day bike ride that raised more than $3
million in support of children with cancer and their
families;
- Launched registration for this year's Canadian Breast Cancer
Foundation (CBCF) CIBC Run for the Cure, celebrating 20 years of
partnership with CBCF to achieve a future without breast cancer;
and
- Supported Fort McMurray
wildfire relief and resettlement efforts with a $100,000 donation to the Canadian Red Cross, as
well as by matching $100,000 in
employee donations to the Canadian Red Cross, Alberta Food Banks
and other local charities.
During the quarter, CIBC was:
- Included in the 2016 Bloomberg Financial Services
Gender-Equality Index for valuing and leveraging gender
differences;
- Recognized as one of the Best 50 Corporate Citizens in
Canada by Corporate Knights;
and
- Named one of Canada's 50 Most
Engaged Workplaces by Achievers.
(The Board of Directors of CIBC reviewed this news release prior
to it being issued. CIBC's controls and procedures support the
ability of the President and Chief Executive Officer (CEO) and the
Chief Financial Officer (CFO) of CIBC to certify CIBC's third
quarter financial report and controls and procedures. CIBC's CEO
and CFO will voluntarily provide to the U.S. Securities and
Exchange Commission a certification relating to CIBC's third
quarter financial information, including the unaudited interim
consolidated financial statements, and will provide the same
certification to the Canadian Securities Administrators).
All amounts are in Canadian dollars and are based on financial
statements prepared in compliance with International Accounting
Standard 34 Interim Financial Reporting, unless otherwise
noted.
A NOTE ABOUT FORWARD-LOOKING STATEMENTS
From time to
time, we make written or oral forward-looking statements within the
meaning of certain securities laws, including in this news release,
in other filings with Canadian securities regulators or the U.S.
Securities and Exchange Commission and in other communications. All
such statements are made pursuant to the "safe harbour" provisions
of, and are intended to be forward-looking statements under
applicable Canadian and U.S. securities legislation, including the
U.S. Private Securities Litigation Reform Act of 1995. These
statements include, but are not limited to, statements made in the
"Core business performance" and "Making a difference in our
Communities" sections of this news release, and the Management's
Discussion and Analysis in our 2015 Annual Report under the heading
"Financial performance overview – Outlook for calendar year 2016"
and other statements about our operations, business lines,
financial condition, risk management, priorities, targets, ongoing
objectives, strategies, the regulatory environment in which we
operate and outlook for calendar year 2016 and subsequent periods.
Forward-looking statements are typically identified by the words
"believe", "expect", "anticipate", "intend", "estimate",
"forecast", "target", "objective" and other similar expressions or
future or conditional verbs such as "will", "should", "would" and
"could". By their nature, these statements require us to make
assumptions, including the economic assumptions set out in the
"Financial performance overview – Outlook for calendar year 2016"
section of our 2015 Annual Report, as updated by quarterly reports,
and are subject to inherent risks and uncertainties that may be
general or specific. A variety of factors, many of which are beyond
our control, affect our operations, performance and results, and
could cause actual results to differ materially from the
expectations expressed in any of our forward-looking statements.
These factors include: credit, market, liquidity, strategic,
insurance, operational, reputation and legal, regulatory and
environmental risk; the effectiveness and adequacy of our risk
management and valuation models and processes; legislative or
regulatory developments in the jurisdictions where we operate,
including the Dodd-Frank Wall Street Reform and Consumer Protection
Act and the regulations issued and to be issued thereunder, the
Organisation for Economic Co-operation and Development Common
Reporting Standard, and regulatory reforms in the United Kingdom and Europe, the Basel Committee on Banking
Supervision's global standards for capital and liquidity reform and
those relating to the payments system in Canada; amendments to, and interpretations of,
risk-based capital guidelines and reporting instructions, and
interest rate and liquidity regulatory guidance; the resolution of
legal and regulatory proceedings and related matters; the effect of
changes to accounting standards, rules and interpretations; changes
in our estimates of reserves and allowances; changes in tax laws;
changes to our credit ratings; political conditions and
developments; the possible effect on our business of international
conflicts and the war on terror; natural disasters, public health
emergencies, disruptions to public infrastructure and other
catastrophic events; reliance on third parties to provide
components of our business infrastructure; potential disruptions to
our information technology systems and services; increasing cyber
security risks which may include theft of assets, unauthorized
access to sensitive information, or operational disruption; social
media risk; losses incurred as a result of internal or external
fraud; anti-money laundering; the accuracy and completeness of
information provided to us concerning clients and counterparties;
the failure of third parties to comply with their obligations to us
and our affiliates or associates; intensifying competition from
established competitors and new entrants in the financial services
industry including through internet and mobile banking;
technological change; global capital market activity; changes in
monetary and economic policy; currency value and interest rate
fluctuations, including as a result of market and oil price
volatility; general business and economic conditions worldwide, as
well as in Canada, the U.S. and
other countries where we have operations, including increasing
Canadian household debt levels and global credit risks; our success
in developing and introducing new products and services, expanding
existing distribution channels, developing new distribution
channels and realizing increased revenue from these channels;
changes in client spending and saving habits; our ability to
attract and retain key employees and executives; our ability to
successfully execute our strategies and complete and integrate
acquisitions and joint ventures; the risk that expected synergies
and benefits of the acquisition of PrivateBancorp, Inc. will not be
realized within the expected time frame or at all or the
possibility that the acquisition does not close when expected or at
all because required regulatory, shareholder or other approvals are
not received or other conditions to the closing are not satisfied
on a timely basis or at all; and our ability to anticipate and
manage the risks associated with these factors. This list is not
exhaustive of the factors that may affect any of our
forward-looking statements. These and other factors should be
considered carefully and readers should not place undue reliance on
our forward-looking statements. Additional information about these
factors can be found in the "Management of risk" section starting
on page 41 of our 2015 Annual Report. Any forward-looking
statements contained in this news release represent the views of
management only as of the date hereof and are presented for the
purpose of assisting our shareholders and financial analysts in
understanding our financial position, objectives and priorities and
anticipated financial performance as at and for the periods ended
on the dates presented, and may not be appropriate for other
purposes. We do not undertake to update any forward-looking
statement that is contained in this news release or in other
communications except as required by law.
Conference Call/Webcast
The conference call will be
held at 8:00 a.m. (ET) and is
available in English (416-340-2217, or toll-free 1-866-696-5910,
passcode 6808864#) and French (514-861-2255, or toll-free
1-877-405-9213, passcode 8696193#). Participants are asked to dial
in 10 minutes before the call. Immediately following the formal
presentations, CIBC executives will be available to answer
questions.
A live audio webcast of the conference call will also be
available in English and French at
www.cibc.com/ca/investor-relations/quarterly-results.html.
Details of CIBC's fiscal 2016 third quarter results, as well as
a presentation to investors, will be available in English and
French at www.cibc.com, Investor Relations section, prior to the
conference call/webcast. We are not incorporating information
contained on the website in this news release.
A telephone replay will be available in English (905-694-9451 or
1-800-408-3053, passcode 3554469#) and French (514-861-2272 or
1-800-408-3053, passcode 1143874#) until 11:59 p.m. (ET) September
1, 2016. The audio webcast will be archived at
www.cibc.com/ca/investor-relations/quarterly-results.html.
About CIBC
CIBC is a leading Canadian-based global
financial institution with 11 million personal banking and business
clients. Through our three major business units - Retail and
Business Banking, Wealth Management and Capital Markets - CIBC
offers a full range of products and services through its
comprehensive electronic banking network, branches and offices
across Canada with offices in
the United States and around the
world. Ongoing news releases and more information about CIBC can be
found at www.cibc.com/ca/media-centre/ or by following on Twitter
@CIBC, Facebook (www.facebook.com/CIBC) and Instagram @CIBCNow.
SOURCE CIBC - Investor Relations