CIBC profit slips as weaker retail banking, bigger loan-loss provisions hit results

Canadian Imperial Bank of Commerce CM-T reported lower fiscal second-quarter profit and raised its quarterly dividend as weaker retail banking results, larger loan loss provisions and higher expenses dragged down earnings.

After two rival banks reported profits on Wednesday, CIBC’s earnings per share was weaker than analysts expected, even as revenue rose 9 per cent year over year.

Canada’s fifth-largest bank earned $1.52-billion, or $1.62 per share, in the quarter that ended April 30. That compared with $1.65-billion, or $3.55 per share, in the same quarter last year – before CIBC completed a two-for- one share split earlier this month.

After adjusting for special items, including costs related to CIBC’s acquisition of retailer Costco’s credit card portfolio, CIBC said it earned $1.77 per share. On average, analysts expected adjusted earnings of $1.80 per share.

The bank raised its quarterly dividend by 2.5 cents per share to 83 cents.

The Costco acquisition also drove up provisions for credit losses – the funds banks set aside to cover loans that may default – which were $303-million in the quarter. That was up from an unusually low $32-million a year earlier, and included a $94-million increase related to the Costco card portfolio.

The bank’s costs also increased nearly 13 per cent to $3.1-billion, driven by higher performance-based pay as well as investments in the business and pressure from inflation.

Profit from CIBC’s core Canadian personal and business banking division were $496-million, down 18 per cent from a year earlier, driven by higher loan loss provisions and expenses.

Canadian commercial banking and wealth management profit of $480-million was up 20 per cent as revenue increased, but earnings from US commercial and wealth fell 17 per cent to $180-million.

The bank’s capital markets division had a strong quarter, with profit of $540-million, driven by higher revenue from the global markets and direct financial services businesses.

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