Shares of Canadian Imperial Bank of Commerce (CM) rose 1.9% as the company reported impressive first-quarter fiscal 2014 earnings (ended Jan 31) on Feb 27. Adjusted earnings per share came in at C$2.31 per share, increasing 9.0% year over year.
Results benefited from top-line growth, lower provision for credit losses and a drop in operating expenses. Further, higher loans and deposit balances was the tailwind.
Canadian Imperial’s adjusted net income grew 7.8% year over year to C$951 million ($891.1 million) in the quarter.
Performance in Detail
Total revenue came in at $3.6 billion ($3.37 billion), up 14.8% from the prior-year quarter. Additionally, adjusted revenues came in at C$3.4 billion ($3.19 billion), rising 5.0% year over year.
Net interest income was C$1.9 billion ($1.78 billion), increasing 2.7% from the year-ago quarter. The primary reasons behind the rise were volume growth across most retail products and higher revenues from corporate banking. These positives were partially offset by lower cards revenues.
Non-interest income grew 32.0% from the year-ago quarter to C$1.7 billion ($1.59 billion). The increase mainly reflected gains related to the Aeroplan transactions with Aimia and The Toronto-Dominion Bank (TD), the sale of an equity investment in the exited European leveraged finance portfolio and higher mutual fund fees.
Non-interest expenses reached C$2.0 billion ($1.87 billion), down 0.5% year over year. Adjusted efficiency ratio was 56.7%, up from 56.5% as of Jan 31, 2013. A rise in efficiency ratio indicates decline in profitability.
Total provision for credit losses were C$218 million ($204.3 million), down 17.7% from the prior-year quarter. Loan loss ratio was 0.38% compared with 0.42% in the prior-year quarter.
Total assets came in at C$401.0 billion ($358.7 billion) as of Jan 31, 2014, up 2.2% from the prior-year period. Loans and acceptances (net of allowance) increased 2.3% year over year to C$256.8 billion ($229.7 billion) while deposits grew 2.1% year over year to C$314.3 billion ($281.1 billion). Return on common shareholders’ equity was 22.1%, down from 23.17% in the year-ago quarter.
Along with its earnings release, Canadian Imperial Bank declared a quarterly cash dividend of C$0.98 per share for the quarter ending Apr 30, 2014. The dividend will be paid on Apr 28 to shareholders of record on Mar 28.
We expect Canadian Imperial’s strong business model, diversified product mix and strong capital position to continue boosting its bottom line. Nevertheless, a sluggish economic recovery and stringent regulatory requirements will remain drags on its financials.
Canadian Imperial currently carries a Zacks Rank #3 (Hold). Some better-ranked foreign banks include The Royal Bank of Scotland Group plc (RBS) and Mitsubishi UFJ Financial Group, Inc. (MTU). Both of these have a Zacks Rank #2 (Buy).