Canadian Imperial (CM) Stock Up 4.3% as Q2 Earnings Rise Y/Y

Shares of Canadian Imperial Bank of Commerce CM have rallied 4.3% on the NYSE since the release of second-quarter fiscal 2021 (ended Apr 30) results. The company’s adjusted earnings per share came in at C$3.59, up substantially from the prior-year quarter.

Results benefited from rise in non-interest income and substantial fall in provisions. Further, a strong balance sheet position during the quarter supported the results. However, higher costs and fall in net interest income were headwinds.

After considering several non-recurring items, net income was C$1.65 billion ($1.31 billion), reflecting a significant year-over-year jump.

Revenues & Costs Rise

Adjusted total revenues rose 8% year over year to C$4.93 billion ($3.92 billion). The improvement was driven by higher non-interest income.

Net interest income was C$2.74 billion ($2.18 billion), declining marginally from the year-ago quarter. Non-interest income jumped 20% to C$2.19 billion ($1.74 billion).

Adjusted non-interest expenses totaled C$2.76 billion ($2.19 billion), up 2%.

Adjusted efficiency ratio was 54.9% at the end of the reported quarter, down from 57.2% as of Apr 30, 2020. A fall in the efficiency ratio indicates an improvement in profitability.

Total provision for credit losses declined substantially year over year to C$32 million ($25.4 million).

Strong Balance Sheet & Capital Ratios

Total assets were C$782.9 billion ($637.4 billion) as of Apr 30, 2021, relatively stable sequentially. Net loans and acceptances increased 3% to C$432.1 billion ($351.8 billion), while deposits climbed slightly to C$576.6 billion ($469.4 billion) from the prior quarter.

As of Apr 30, 2021, Common Equity Tier 1 ratio was 12.4%, up from 11.3% in the prior-year quarter. Further, Tier 1 capital ratio was 13.9% compared with 12.5% as of Apr 30, 2020. Total capital ratio was 16.2%, up from 14.5%.

Adjusted return on common shareholders’ equity was 17.3% at the end of the fiscal second quarter, up from the prior year’s 4.5%.

Our View

Given anticipations of an improving economy and loan growth, Canadian Imperial is likely to witness steady improvement in revenues. However, low interest rates and a challenging operating backdrop are major 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-eps-surprise-chart | Canadian Imperial Bank of Commerce Quote

The company currently carries a Zacks Rank #2 (Buy). 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 first-quarter 2021 pre-tax profit of $5.8 billion, up 79% from the prior-year quarter. Results benefited from net reserve releases. However, lower revenues and rise in expenses were the undermining factors.

Bank of Montreal’s BMO second-quarter fiscal 2021 (ended Apr 30) adjusted net income of C$2.10 billion ($1.67 billion) increased significantly year over year. The company recorded an improvement in revenues and lower provisions, which supported results to an extent. However, an increase in expenses was a headwind.

Barclays BCS reported first-quarter 2021 net income attributable to ordinary equity holders of £1.70 billion ($2.34 billion), up significantly from the prior-year quarter. Results reflect a rise in revenues along with higher operating expenses. A significant decline in credit impairment charges was a major tailwind.

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