Strong financial performance in Q2 with both earnings and
revenue up year-over-year
TORONTO, May 26, 2016 /CNW/ - CIBC (TSX: CM)
(NYSE: CM) today announced its financial results for the second
quarter ended April 30, 2016.
Second quarter highlights
- Reported net income was $941
million, compared with $911
million for the second quarter a year ago, and $982 million for the prior quarter.
- Adjusted net income(1) was $962 million, compared with $924 million for the second quarter a year ago,
and $1,029 million for the prior
quarter.
- Reported diluted earnings per share (EPS) was $2.35, compared with $2.25 for the second quarter a year ago, and
$2.43 for the prior quarter.
- Adjusted diluted EPS(1) was $2.40, compared with $2.28 for the second quarter a year ago, and
$2.55 for the prior quarter.
- Reported return on common shareholders' equity (ROE) was
18.0% and adjusted ROE(1) was 18.4%.
"CIBC delivered solid results in the second quarter, with strong
revenue and earnings growth across business units," says
Victor G. Dodig, CIBC President and
Chief Executive Officer. "We are continuing to transform our bank
to enhance client experience while delivering value to our
shareholders."
Results for the second quarter of 2016 were affected by the
following items of note aggregating to a negative impact of
$0.05 per share:
- $77 million ($56 million after-tax) increase in legal
provisions;
- $53 million ($47 million after-tax) gain, net of related
transaction and severance costs, on the sale of a processing
centre;
- $40 million ($29 million after-tax) increase in the portion of
the collective allowance recognized in Corporate and Other;
- $30 million income tax recovery
due to the settlement of transfer pricing-related matters;
- $11 million ($8 million after-tax) loss from the structured
credit run-off business; and
- $7 million ($5 million after-tax) amortization of intangible
assets.
CIBC's Basel III Common Equity Tier 1 ratio at April 30, 2016 was 10.4%, and our Tier 1 and
Total capital ratios were 11.9% and 13.9%, respectively, on an
all-in basis compared with Basel III Common Equity Tier 1 ratio of
10.6%, Tier 1 capital ratio of 12.1% and Total capital ratio of
14.2% at the end of the prior quarter. CIBC's Basel III leverage
ratio at April 30, 2016 was 3.8% on
an all-in basis.
CIBC announced a quarterly dividend increase of 3 cents per common share to $1.21 per share.
Subsequent to quarter-end, we completed the sale of our minority
position in American Century Investments (ACI) to Nomura, for
approximately US$1 billion, adding
approximately 50 bps to CIBC's Common Equity Tier 1 ratio.
Core business performance
Retail and Business Banking reported net income of
$652 million for the second quarter,
up $68 million or 12% from the second
quarter a year ago. Excluding items of note, adjusted net
income(1) was $623
million, up $38 million or 7%,
primarily due to solid volume growth that more than offset higher
costs in support of business growth and higher loan losses due to
increased write-offs and bankruptcies in cards and personal
lending.
Retail and Business Banking continued to make progress against
our objectives of leadership in profitable revenue growth and
client experience. During the second quarter of 2016:
- We launched the CIBC SmartTM account, a
first-of-its-kind bank account with flexible fees that are capped
monthly, and that automatically adjust to client needs with lower
fees in months where clients' banking needs are less.
Subsequent to quarter-end:
- We launched innovative new technology to enable clients to use
digital signatures and secure document uploads to deepen their
relationship with CIBC through their mobile device; the technology
is used in CIBC's new Digital Account Open functionality and in the
new CIBC Hello Home™ app, which allows clients to apply for a
mortgage via a mobile device; and
- We delivered Apple Pay to CIBC clients, allowing them to add
their Visa, MasterCard, or Interac debit cards to their eligible
Apple devices to pay simply and securely wherever contactless
payments are accepted.
Wealth Management reported net income of $113 million for the second quarter, down
$15 million or 12% from the second
quarter a year ago. Excluding items of note, adjusted net
income(1) was $115
million, down $18 million or
14%, due to lower revenue partially offset by lower expenses. Since
the announced sale of ACI in December
2015, we ceased recognizing income from ACI, and revenue was
down $31 million or 5% in the second
quarter of 2016 largely due to this factor. Commission revenue was
also lower as a result of uncertain market conditions driving a
decline in transaction volumes.
During the second 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 achieved the second highest average rating among the big 6
bank-owned brokerages in the Investment Executive 2016 Brokerage
Report Card; and
- We launched the Renaissance Private Investment Program for
high-net-worth clients, and other products.
Capital Markets reported net income of $252 million for the second quarter, up
$12 million or 5% from the second
quarter a year ago. Excluding items of note, adjusted net
income(1) was $260
million, up $15 million or 6%,
primarily due to higher trading and corporate banking revenue,
which more than offset lower revenue from our U.S. real estate
finance business and lower investment portfolio gains.
As a leading capital markets franchise in Canada that is active in core Canadian
industries in the rest of the world, Capital Markets acted as:
- Financial advisor to Suncor Inc. on its $7 billion acquisition of Canadian Oil Sands
Limited;
- Joint lead and bookrunner on a US$2
billion 2.50% 10 year global bond offering for the Province
of Québec;
- Co-underwriter, joint bookrunner and co-lead arranger on a
$1 billion asset sale bridge loan to
support Shaw Communications Inc.'s acquisition of Wind Mobile
Corp.; and
- Lead bookrunner and underwriter on a $1
billion offering of convertible unsecured subordinated
debentures represented by instalment receipts for Algonquin Power
& Utilities Corp.
(1)
|
For additional
information, see the "Non-GAAP measures" section.
|
Credit quality
Provision for credit losses was $324
million. Excluding the increase in the collective allowance
of $40 million, identified as an item
of note, the provision for credit losses was $284 million, up $87
million or 44% from the same quarter last year. This
increase was primarily driven by higher losses in the oil and gas
sector, and higher write-offs and bankruptcies 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
six
|
|
|
|
months
ended
|
|
months
ended
|
$ millions, except
per share amounts
|
|
|
|
2016
Apr. 30
|
|
2016
Jan. 31
|
|
2015
Apr. 30
|
|
|
2016
Apr. 30
|
|
2015
Apr. 30
|
Reported and adjusted diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
attributable to common
shareholders
|
|
A
|
$
|
926
|
$
|
968
|
$
|
895
|
|
$
|
1,894
|
$
|
1,802
|
After-tax impact of
items of note (1)
|
|
|
|
21
|
|
47
|
|
13
|
|
|
68
|
|
46
|
Adjusted net income
attributable to common
shareholders (2)
|
|
B
|
$
|
947
|
$
|
1,015
|
$
|
908
|
|
$
|
1,962
|
$
|
1,848
|
Diluted
weighted-average common shares
outstanding (thousands)
|
|
C
|
|
395,150
|
|
397,428
|
|
397,785
|
|
|
396,302
|
|
397,833
|
Reported diluted EPS
($)
|
|
A/C
|
$
|
2.35
|
$
|
2.43
|
$
|
2.25
|
|
$
|
4.78
|
$
|
4.53
|
Adjusted diluted EPS
($) (2)
|
|
B/C
|
|
2.40
|
|
2.55
|
|
2.28
|
|
|
4.95
|
|
4.64
|
Reported and adjusted return on common
shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common
shareholders' equity
|
|
D
|
$
|
20,899
|
$
|
21,233
|
$
|
18,437
|
|
$
|
21,068
|
$
|
18,277
|
Reported return on
common shareholders' equity
|
|
A/D(3)
|
|
18.0%
|
|
18.1%
|
|
19.9%
|
|
|
18.1%
|
|
19.9%
|
Adjusted return on
common shareholders' equity (2)
|
|
B/D(3)
|
|
18.4%
|
|
19.0%
|
|
20.2%
|
|
|
18.7%
|
|
20.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
Wealth
|
|
Capital
|
|
Corporate
|
|
CIBC
|
$ millions, for the
three months ended
|
|
|
Banking
|
Management
|
|
Markets
|
|
and Other
|
|
Total
|
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
|
2016
|
Reported net income
(loss)
|
|
|
$
|
684
|
$
|
119
|
$
|
244
|
$
|
(65)
|
$
|
982
|
Jan. 31
|
After-tax impact of
items of note (1)
|
|
|
|
2
|
|
3
|
|
4
|
|
38
|
|
47
|
|
Adjusted net income
(loss) (2)
|
|
|
$
|
686
|
$
|
122
|
$
|
248
|
$
|
(27)
|
$
|
1,029
|
2015
|
Reported net income
(loss)
|
|
|
$
|
584
|
$
|
128
|
$
|
240
|
$
|
(41)
|
$
|
911
|
Apr. 30
(4)
|
After-tax impact of
items of note (1)
|
|
|
|
1
|
|
5
|
|
5
|
|
2
|
|
13
|
|
Adjusted net income
(loss) (2)
|
|
|
$
|
585
|
$
|
133
|
$
|
245
|
$
|
(39)
|
$
|
924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ millions, for the
six months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
Reported net income (loss)
|
|
|
$
|
1,336
|
$
|
232
|
$
|
496
|
$
|
(141)
|
$
|
1,923
|
Apr. 30
|
After-tax impact of items of note
(1)
|
|
|
|
(27)
|
|
5
|
|
12
|
|
78
|
|
68
|
|
Adjusted net income (loss)
(2)
|
|
|
$
|
1,309
|
$
|
237
|
$
|
508
|
$
|
(63)
|
$
|
1,991
|
2015
|
Reported net income
(loss)
|
|
|
$
|
1,228
|
$
|
256
|
$
|
511
|
$
|
(161)
|
$
|
1,834
|
Apr. 30
(4)
|
After-tax impact of
items of note (1)
|
|
|
|
(31)
|
|
9
|
|
1
|
|
67
|
|
46
|
|
Adjusted net income
(loss) (2)
|
|
|
$
|
1,197
|
$
|
265
|
$
|
512
|
$
|
(94)
|
$
|
1,880
|
(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
six
|
|
months
ended
|
|
months
ended
|
$ millions
|
|
2016
Apr. 30
|
|
2016
Jan. 31
|
|
2015
Apr. 30
|
|
|
2016
Apr. 30
|
|
2015
Apr. 30
|
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 from the
structured credit run-off business
|
|
11
|
|
5
|
|
8
|
|
|
16
|
|
20
|
Amortization of
intangible assets
|
|
7
|
|
9
|
|
10
|
|
|
16
|
|
21
|
Increase in legal
provisions
|
|
77
|
|
-
|
|
-
|
|
|
77
|
|
-
|
Increase in
collective allowance recognized in Corporate and Other
(1)
|
|
40
|
|
69
|
|
-
|
|
|
109
|
|
-
|
Restructuring charges
primarily relating to employee severance
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
85
|
Pre-tax impact of
items of note on net income
|
|
82
|
|
83
|
|
18
|
|
|
165
|
|
57
|
|
Income tax impact on
above items of note
|
|
(31)
|
|
(21)
|
|
(5)
|
|
|
(52)
|
|
(11)
|
|
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)
|
|
-
|
|
|
(15)
|
|
-
|
After-tax impact of
items of note on net income
|
$
|
21
|
$
|
47
|
$
|
13
|
|
$
|
68
|
$
|
46
|
(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 celebrated the official re-opening of the newly-renovated
children's floor including an expanded Just for Kids Clinic at
St. Joseph's Health Centre
(Toronto), thanks to a
$1 million donation by CIBC to the
hospital's Promise Campaign, co-chaired by CIBC President &
CEO, Victor Dodig;
- We announced a $250,000 donation
to Alberta Food Banks, the largest single contribution ever made to
the charity, to help people who have been impacted by the recent
economic decline. CIBC team members in Alberta also wrapped up a month-long campaign
in support of Alberta Children's Hospital, raising more than
$25,000 for cancer treatment for
kids;
- We hosted the 'CIBC Skate for the Cure' on the Rideau Canal in
Ottawa in support of the Canadian
Breast Cancer Foundation. CIBC was recently inducted into the
Sponsorship Marketing Council of Canada Hall of Fame for our
long-term support of the breast cancer cause; and
- We proudly sponsored the 2016 Indspire Awards which recognize
Indigenous professionals and youth who demonstrate outstanding
career achievement.
In addition, CIBC was recognized during the quarter as one
of Canada's Best Diversity
Employers by Mediacorp, as well as one of Canada's Top Employers for Young People by
Mediacorp, and one of Canada's
Best Employers by Forbes.
Subsequent to quarter-end:
- CIBC announced a $100,000
donation to the Canadian Red Cross in support of Fort McMurray, and we will match the first
$100,000 raised by employees for the
community; and
- CIBC announced it had been included in the 2016 Bloomberg
Financial Services Gender-Equality Index.
(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 second
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 second
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; 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 7:30
a.m. (ET) and is available in English (416-340-2217, or
toll-free 1-866-696-5910, passcode 1723204#) and French
(514-861-2255, or toll-free 1-877-405-9213, passcode 6444513#).
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 second 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 2745334#) and French (514-861-2272 or
1-800-408-3053, passcode 7092895#) until 11:59 p.m. (ET) June 2,
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