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Canadian Imperial (CM) Up as Q1 Earnings & Revenues Rise

Zacks Equity Research

Shares of Canadian Imperial Bank of Commerce CM rallied 1.1% on the NYSE in response to first-quarter fiscal 2020 (ended Jan 31) results. The bank’s adjusted earnings per share were C$3.24, up 7.6% from the year-ago reported figure.

In the first fiscal quarter, Canadian Imperial recorded a $339 million ($255 million) restructuring charge, primarily relating to employee severance as it undertook layoffs and shuffled top management ranks.

Results were driven by increase in non-interest income and net interest income along with lower provisions. Also, rise in loans and deposits acted as a tailwind. However, higher operating expenses posed an undermining factor.

After considering several non-recurring items, net income was C$1.21 billion ($1.05 billion), reflecting a rise of 2.5% year over year.

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Revenues & Adjusted Expenses Rise

Total revenues for the quarter were up 6.3% year over year to C$4.86 billion ($3.59 billion).

Net interest income was C$2.76 billion ($2.03 billion), up 6.4% from the year-ago quarter. The increase reflected rise in interest income and lower interest expenses.

Non-interest income increased 6.3% year over year to C$2.09 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$2.7 billion ($1.99 billion), increasing 7.9% from the year-ago quarter.

Adjusted efficiency ratio was 55% at the end of the reported quarter, up from 54.4% as of Jan 31, 2019. Rise in efficiency ratio indicates decline in profitability.

Total provision for credit losses was down 22.8% year over year to C$261 million ($219.1 million).

Strong Balance Sheet & Capital Ratios

Total assets were C$672.1 billion ($486.9 billion) as of Jan 31, 2020, up 3.1% from the prior quarter. Net loans and acceptances grew nearly 1% sequentially to C$402.5 billion ($299.6 billion) and deposits rose 2.5% to C$497.9 billion ($364.5 billion).

As of Jan 31, 2020, Common Equity Tier 1 ratio was 11.3%, up from 11.2% in the prior-year quarter. Furthermore, Tier 1 capital ratio was 12.5% compared with 12.7% as of Jan 31, 2019. Total capital ratio was 14.5%, down from 14.7%.

Adjusted return on common shareholders’ equity was 16.1% at the end of the reported quarter, up from 16% a year ago.

Dividend Hike

Concurrently, Canadian Imperial announced a quarterly dividend of C$1.46 per share, representing a hike of 1.4% from the prior payout.

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 and EPS Surprise

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

Canadian Imperial Bank of Commerce price-eps-surprise | 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

HSBC Holdings HSBC recorded a pre-tax loss of $3.9 billion in fourth-quarter 2019 against a pre-tax profit of $3.3 billion reported in the prior-year quarter. The pre-tax loss was primarily impacted by a goodwill impairment charge of $7.3 billion and a U.K. bank levy charge of $1 billion.

Barclays BCS reported fourth-quarter 2019 net income attributable to ordinary equity holders of £681 million ($877.4 million). This reflects a marked improvement from net loss attributable to ordinary equity holders of £14 million ($18 million) in the year-ago quarter.

Itau Unibanco Holding S.A. ITUB posted recurring earnings of R$7.3 billion ($1.77 billion) in fourth-quarter 2019, up 12.6% year over year. Including non-recurring items, net income came in at R$7.5 billion ($1.82 billion), up 20.6%.

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