Shares of Canadian Imperial Bank of Commerce (CM) rallied 2.3% as the company reported impressive fourth-quarter fiscal 2013 earnings (ended Oct 31) on Dec 5. Adjusted earnings per share came in at C$2.22 per share, increasing 8.8% year over year.
Results reflected top-line growth, lower provision for credit losses and increasing loans and deposits. However, higher non interest expenses and a decline in non interest income were the headwinds for the quarter.
Canadian Imperial’s adjusted net income increased 5.5% year over year to C$905 million ($872.4 million) in the quarter. Further, for fiscal 2013, adjusted net income stood at C$3.6 billion ($3.5 billion) or C$8.23 per share, up 5.9% from C$3.4 billion ($3.3 billion) or $7.85 per share in fiscal 2012.
Performance in Detail
Canadian Imperial Bank’s total revenue came in at $3.2 billion ($3.08 billion), up 1.3% from the prior-year quarter. Additionally, adjusted revenues came in at C$3.3 billion ($3.18 billion), up 3.1% year over year.
For fiscal 2013, total revenue was C$12.8 billion ($12.55 billion), increasing 1.9% from the prior-year figure.
For the reported quarter, net interest income (:NII) was C$1.89 billion ($1.82 billion), increasing 2.5% year over year. Net interest margin increased 2 basis points year over year to 1.85%.
Non-interest income came in at C$1.3 billion ($1.25 billion), down 0.4% from the previous-year quarter. The decline was mainly due to decrease in underwriting and advisory fees, partially offset by an increase in deposit and payment fees as well as mutual fund fees.
Non-interest expenses reached C$1.9 billion ($1.83 billion), increasing 5.6% year over year. Adjusted efficiency ratio was 56.4%, down from 56.5% as of Oct 31, 2012. A fall in efficiency ratio indicates a rise in profitability.
Total provision for credit losses were C$271 million ($261.2 million), declining 17.4% from the prior-year quarter. Loan loss ratio stood at 0.41% compared with 0.53% in the prior-year quarter. The company expects to maintain a loan loss ratio below 60 bps in the upcoming quarters.
Total assets came in at C$398.4 billion ($380.71 billion) as of Oct 31, 2013, up 1.3% from the prior-year period. Loans and acceptances (net of allowance) increased 1.4% year over year to C$246.65 billion ($235.69 billion), while deposits increased 4.3% year over year to C$313.53 billion ($299.61 billion). Return on common shareholders’ equity was 19.9 % versus 21.7% in the year-ago quarter.
Along with its earnings release, Canadian Imperial Bank declared a quarterly cash dividend of C$0.96 per share for the quarter ending Jan 31, 2014. The dividend will be paid on Jan 28, 2014 to shareholders of record as of Dec 27, 2013.
Performance of Other Canadian Banks
The Toronto-Dominion Bank (TD) reported fourth-quarter 2013 adjusted earnings of C$1.90 per share, which compared favorably with C$1.83 earned in the year-ago quarter. For fiscal 2013, adjusted net income was C$1.82 billion ($1.54 billion), up 1.2% year over year.
Results were driven by a rise in revenues, partly offset by higher operating expenses. Further, rise in asset holdings was a tailwind for the quarter.
Royal Bank of Canada (RY) reported fourth-quarter 2013 net income of C$2.1 billion ($2.0 billion), beating the year-ago earnings by 10.5%. Moreover, for fiscal 2013, net income was C$8.4 billion (8.1), up 11.8% from fiscal 2012. Results benefited from top-line growth and lower provisions for credit losses, partly offset by increased non-interest expenses.
Though results were impressive, some issues had a negative impact on the reported quarter that include a substantial restructuring cost related to FirstCaribbean International Bank Ltd, impairment of an equity position related to company’s exited U.S. leveraged finance portfolio and development and marketing expenses towards company’s travel rewards program and towards proposed Aeroplan transactions with Aimia Canada Inc. and The Toronto-Dominion Bank Group in the first quarter of 2014.
However, we expect Canadian Imperial Bank’s strong business model, diversified product mix and sturdy capital position to boost its bottom line in the upcoming quarters.
Canadian Imperial currently carries a Zacks Rank #3 (Hold). A better-ranked bank is Grupo Financiero Galicia S.A. (GGAL), which has a Zacks Rank #1 (Strong Buy).