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Canadian Imperial (CM) Up as Q3 Earnings & Revenues Rise

Zacks Equity Research

Shares of Canadian Imperial Bank of Commerce CM rallied 2.3% on the NYSE following the release of third-quarter fiscal 2019 (ended Jul 31) results. The bank’s adjusted earnings per share were C$3.10, up 1% from the year-ago reported figure.

Results were driven by increase in non-interest income and net interest income. Also, rise in loans and deposits acted as a tailwind. However, significant rise in provisions and higher operating expenses were the undermining factors.

After considering several non-recurring items, net income was C$1.40 billion ($1.05 billion), reflecting a rise of 2% year over year.

Adjusted Revenues & Expenses Rise

Adjusted total revenues were up 4% year over year to C$4.77 billion ($3.59 billion). On a reported basis, total revenues came in at C$4.73 billion ($3.56 billion), reflecting an increase of 4%.

Net interest income was C$2.69 billion ($2.03 billion), up 5% from the year-ago quarter. The increase reflected rise in interest income, partially offset by higher interest expenses.

Non-interest income increased 3% year over year to C$2.04 billion ($1.54 billion). The rise was mainly driven by credit fees, investment management and custodial fees, and mutual fund fees.

Adjusted non-interest expenses totaled C$2.64 billion ($1.99 billion), increasing 5% from the year-ago quarter.

Adjusted efficiency ratio was 55.4% at the end of the reported quarter, up from 55.0% as of Jul 31, 2018. Rise in efficiency ratio indicates decline in profitability.

Total provision for credit losses was up 21% year over year to C$291 million ($219.1 million).

Strong Balance Sheet & Capital Ratios

Total assets were C$642.5 billion ($486.9 billion) as of Jul 31, 2019, up 1% from the prior quarter. Net loans and acceptances grew nearly 1% sequentially to C$395.4 billion ($299.6 billion) and deposits rose nearly 1% to C$481 billion ($364.5 billion).

As of Jul 31, 2019, Common Equity Tier 1 ratio was 11.4%, up from 11.3% in the prior-year quarter. Furthermore, Tier 1 capital ratio was 12.7% compared with 12.8% as of Jul 31, 2018. Total capital ratio was 15.2%, up from 14.8%.

Adjusted return on common shareholders’ equity was 15.6% at the end of the reported quarter, down from 17.1% a year ago.

Dividend Hike

Concurrently, Canadian Imperial announced a quarterly dividend of C$1.44 per share, representing a hike of 2.9% from the prior payout. The dividend will be paid on Oct 28 to shareholders of record as on Sep 27.

Our Viewpoint

Given an improving economy and loan growth, Canadian Imperial is expected to witness steady improvement in revenues. However, elevated expenses and a challenging operating backdrop remain major 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-eps-surprise-chart | Canadian Imperial Bank of Commerce Quote

Canadian Imperial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

Royal Bank of Canada’s RY third-quarter fiscal 2019 (ended Jul 31) net income was C$3.3 billion ($2.5 billion), up 5% from the prior-year quarter. The bank witnessed higher revenues, and growth in loans and deposit balances. However, rise in expenses and higher provisions adversely impacted results to some extent.

HSBC Holdings HSBC recorded second-quarter 2019 pre-tax profit of $6.2 billion, up 4% year over year. Results benefited from an improvement in revenues. Also, a slight decline in operating expenses acted as a tailwind.

Barclays BCS reported second-quarter 2019 net income attributable to ordinary equity holders of £1.03 billion ($1.32 billion). This reflects a decline of 19% year over year.

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