Canadian Imperial Bank of Commerce became the last Big Six lender to announce a dividend hike, despite falling earnings in its last quarter.
The bank’s net income fell eight percent year-on-year to $ 1.52 billion in the second fiscal quarter, which ended April 30. On a tight basis, he earned $ 1.77 per share; analysts, on average, predicted a $ 1.78 profit per share.
Although CIBC countered the trend with record growth in earnings in its capital markets division during the quarter, its overall profitability was affected as credit quality deteriorated.
Across the institution, CIBC recorded $ 303 million in provisions for credit losses during the second fiscal quarter. That’s almost 10 times more than a year earlier, when it had $ 32 million in provisions. In the previous quarter, CIBC recorded $ 75 million in provisions.
In a statement, CIBC said its acquisition of Costco’s Canadian credit card portfolio was one of the reasons for the increase in money set aside for loans that could go wrong. This agreement with Costco was announced last September; at the time, CIBC said the portfolio (formerly owned by Capital One Financial Corp.) had about $ 3 billion in balances. Analysts suggested that the main motivation for the deal was an opportunity for CIBC to sell cross-border customers.
“At first glance, CIBC reported an online result, but dig a little deeper and the moving parts are interesting,” wrote Meny Grauman, an analyst with Scotiabank’s global securities research team, in a report. to customers. He said provisions for loan losses “masked” revenues that rose nine percent year-over-year.
The deterioration in earnings was most pronounced in CIBC’s central Canadian personal and business banking unit, where net income fell 18 percent year-on-year to $ 496 million. Provisions for credit losses from the division nearly tripled sequentially to $ 273 million, up from $ 98 million in the first fiscal quarter.
In addition to the fall in credit quality in the last quarter, CIBC also saw its non-interest spending rise 13 percent year-over-year to $ 3.1 billion.
“We have achieved well-diversified growth in our bank during the second quarter, as we continue to invest in executing our customer-centric strategy and continue to leverage our momentum.… As we move forward, we will continue to take a purpose-oriented approach to measure. that we navigate the evolving operating environment, “Victor Dodig, CIBC’s chief executive, said in a statement.
The CIBC also said Thursday that its Tier 1 capital ratio of ordinary capital fell to 11.7% from 12.2% in the previous quarter.
However, in news that is likely to be welcomed by investors, the bank announced that its quarterly dividend will rise to $ 0.83 per share from $ 0.805 as of the July 28 payment. BMO Financial Group and Bank of Nova Scotia announced dividend increases on Wednesday when they launched the profit season of the country’s largest banks.