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Canadian Imperial (CM) Down as Q2 Earnings Fall on Higher Costs

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Shares of Canadian Imperial Bank of Commerce CM declined almost 1% in response to dismal second-quarter fiscal 2022 (ended Apr 30) results. The company’s adjusted earnings per share came in at C$1.77, down 1% from the prior-year quarter.

Canadian Imperial completed a two-for-one share split of CM common shares, effective as of May 13, 2022. All per share numbers reflect the impact of this stock split.

Results were adversely impacted by higher expenses and a rise in provisions. However, a rise in revenues, an improvement in loan demand and a strong balance sheet position acted as tailwinds.

After considering several non-recurring items, net income was C$1.52 billion ($1.20 billion), reflecting an 8% year-over-year decline.

Revenues & Costs Rise

Adjusted total revenues rose 9% year over year to C$5.37 billion ($4.24 billion). The improvement was driven by the higher net interest income and non-interest income.

The net interest income was C$3.09 billion ($2.44 billion), growing 12%. The non-interest income increased 5% to C$2.29 billion ($1.81 billion).
 
Adjusted non-interest expenses totaled C$3.03 billion ($2.39 billion), up 11%.

The adjusted efficiency ratio was 55.8% at the end of the reported quarter, rising from 54.9% as of Apr 30, 2021. An increase in the efficiency ratio indicates a deterioration in profitability.

Provision for credit losses was C$209 million ($165 million), surging substantially from the prior-year quarter.

Strong Balance Sheet & Capital Ratios

Total assets were C$894.1 billion ($695.3 billion) as of Apr 30, 2022, up 4% sequentially. Net loans and acceptances increased 4% to C$502.4 billion ($390.7 billion), while deposits grew 2% to C$665.5 billion ($517.5 billion).

As of Apr 30, 2022, Common Equity Tier 1 ratio was 11.7% compared with 12.4% in the prior-year quarter. Tier 1 capital ratio was 13.2%, compared with 13.9% in the prior-year period level. Total capital ratio was 15.3% compared with 16.2%.

Adjusted return on common shareholders’ equity was 15.2% at the end of the fiscal second quarter, down from the prior year’s 17.3%.

Our Take

Given the improving economy and loan growth, Canadian Imperial is likely to witness a steady improvement in revenues. However, a challenging operating backdrop and rising expenses are near-term concerns.

Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise

Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise

Canadian Imperial Bank of Commerce price-consensus-eps-surprise-chart | Canadian Imperial Bank of Commerce Quote

CM currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

HSBC Holdings HSBC reported a first-quarter 2022 pre-tax profit of $4.2 billion, down 27.9% from $5.8 billion recorded in the prior-year quarter.

HSBC’s results were primarily hurt by a decline in adjusted revenues, partly offset by lower expenses. Expected credit losses and other credit impairment charges were a charge in the quarter under review against a release in the prior-year quarter, which was another headwind.

ICICI Bank’s IBN fourth-quarter fiscal 2022 (ended Mar 31) net income was INR70.19 billion ($926 million), jumping 59% from the prior-year quarter.

Results were driven by a rise in net interest income, non-interest income and growth in loans and deposits. Provisions also declined during the quarter. However, higher operating expenses posed a headwind for ICICI Bank.


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