CIBC kicks off bank earnings with surge in business south of the border
Canadian Imperial Bank of Commerce kicked off another earnings season for Canada’s biggest banks on Thursday, with the Toronto-based lender announcing a smaller first-quarter profit that was bolstered by an expanded business in the United States.
CIBC, Canada’s fifth-largest bank, said reported net income for the quarter ended Jan. 31 was nearly $1.33 billion, down from around $1.41 billion for the same three months a year ago.
That, however, reflected some one-time items, such as a $299-million gain on the sale and lease-back of retail properties CIBC had realized for last year’s first quarter, as well as an $88-million charge tied to recent U.S. tax reforms that the bank booked for this year’s quarter.
Canadian banks with U.S. operations were forced to revalue deferred tax assets or liabilities they might have had because of the cut to the U.S. corporate tax rate that was signed into law late last year. CIBC said in its management’s discussion and analysis that the tax cut, which reduced the U.S. corporate rate to 21 per cent from 35 per cent, caused “a significant decrease in CIBC’s U.S. deferred tax assets.”
But the bank’s focus on the U.S. helped it elsewhere, and followed an investor day in December at which CIBC said it was looking to nearly double the contribution that U.S. operations make to its earnings over the next three years.
CIBC recorded $134 million in reported net income from its U.S. commercial banking and wealth management unit for the first quarter of 2018, an increase of $105 million — or 362 per cent — from last year’s first quarter.
The U.S.-based earnings for CIBC were driven by the bank’s $5-billion purchase of Chicago-based PrivateBancorp Inc., and its subsidiary, The PrivateBank, in June 2017. The PrivateBank was rebranded as CIBC Bank USA.
CIBC said adjusted net income for the first quarter was approximately $1.43 billion, up from about $1.17 billion for the same three months last year.
“In the quarter, CIBC delivered strong results across all four strategic business units,” said Victor Dodig, president and chief executive officer of CIBC, in a release. “We are creating value for shareholders by building a relationship-focused bank, diversifying our earnings growth in the U.S. region, improving operational efficiencies and maintaining disciplined capital deployment.”
Analysts had predicted adjusted earnings per share of $2.83 for CIBC’s first quarter. CIBC reported adjusted diluted EPS of $3.18.
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