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Canadian Imperial (CM) Stock Down 2.7% as Q1 Earnings Fall

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Shares of Canadian Imperial Bank of Commerce CM declined 2.7% on NYSE, following the release of first-quarter fiscal 2019 (ended Jan 31) results. Adjusted earnings per share were C$3.01, down 5% from the prior-year quarter.

Results were adversely impacted by decline in non-interest income and significant rise in provisions. However, lower expenses, increase in net interest income and strong balance sheet position acted as tailwinds.

After considering several non-recurring items, net income was C$1.18 billion ($0.9 billion), reflecting a decline of 11% year over year.

Adjusted Revenues & Costs Fall

Adjusted total revenues were up marginally year over year to C$4.59 billion ($3.45 billion). On a reported basis, total revenues were C$4.57 billion ($3.43 billion), indicating an increase of 2% from the prior-year quarter.

Net interest income was C$2.60 billion ($1.95 billion), up 5% from the year-ago quarter. The improvement reflected an increase in interest income, partly offset by higher interest expenses.

Non-interest income decreased 1% year over year to C$2 billion ($1.5 billion).

Adjusted non-interest expenses totaled C$2.50 billion ($1.88 billion), declining 1% from the year-ago quarter.

Adjusted efficiency ratio was 54.4% at the end of the reported quarter, down from 55.1% as of Jan 31, 2018. Fall in efficiency ratio indicates improved profitability.

Total provision for credit losses grew substantially year over year to C$338 million ($253.9 million).

Improving Balance Sheet & Capital Ratios

Total assets were C$614.6 billion ($468.2 billion) as of Jan 31, 2019, up 3% from the prior quarter. Both net loans and acceptances, and deposits grew 1% sequentially to C$385.1 billion ($293.4 billion) and C$464.7 billion ($354 billion), respectively.

As of Jan 31, 2019, Common Equity Tier 1 ratio was 11.2% compared with 10.8% as of Jan 31, 2018. Further, Tier 1 capital ratio was 12.7% compared with 12.4% as of Jan 31, 2018. Total capital ratio was 14.7%, improving from 14.1% in the prior-year quarter.

Adjusted return on common shareholders’ equity was 16.0% at the end of the reported quarter, down from 18.8% a year ago.

Our Viewpoint

Given the improving economy and loan growth, Canadian Imperial is expected to witness steady rise in revenues. However, elevated expenses and challenging operating backdrop remain major concerns.

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

Performance of Other Foreign Banks

HSBC Holdings HSBC recorded pre-tax profit of $3.3 billion for fourth-quarter 2018, up 41.3% year over year. This increase was due to rise in revenues.

Barclays BCS reported net loss attributable to ordinary equity holders of £76 million ($97.8 million) in fourth-quarter 2018. This reflects improvement from net loss attributable to ordinary equity holders of £1.29 billion ($1.66 billion) recorded in the prior-year quarter.

Deutsche Bank DB incurred net loss of €409 million ($467.1 million) in fourth-quarter 2018 compared with loss of €2.4 billion in the year-ago quarter. The bank incurred loss before taxes of €319 million ($364.3 million).

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