* Fourth-quarter results exceed estimates
* Wholesale banking income jumps
* Retail banking weaker
* Shares down 0.5 pct
By Cameron French
TORONTO, Dec 6 Canadian Imperial Bank of Commerce reported a 13 percent increase in quarterly earnings on Thursday, slightly ahead of estimates, but the bank's shares declined on concerns the profit gain will be difficult to replicate in coming quarters.
The increase was fueled by stronger capital markets-related profit, while retail banking weakened due to CIBC's decision earlier this year to wind down its FirstLine mortgage division, which sold inexpensive mortgages through brokerages.
Analysts said CIBC's move to raise average interest margins on its loans could make it a challenge for it to show significant loan growth next year, when Canadian mortgage and consumer loan growth is expected to stall.
"(CIBC's) decision to exit the mortgage broker network and its impact on fourth-quarter domestic retail loan growth could lead the market to conclude that its earnings growth could be one of the slowest of the (Canadian banks) next year," Barclays Capital analyst John Aiken said in a note.
The bank, Canada's fifth-largest, earned C$852 million ($858.05 million), or C$2.02 a share, in its fourth quarter, ended Oct. 31, compared with C$757 million, or C$1.79 a share, a year earlier.
Excluding certain items, it earned C$2.04 a share, ahead of analysts' average estimate of C$1.98 as compiled by Thomson Reuters I/B/E/S.
Despite the beat, the bank's shares were down 0.5 percent at C$80.09 just after midday.
Competitors Toronto-Dominion Bank and National Bank of Canada also reported quarterly results on Tuesday, and the shares of both were also on the defensive on the Toronto Stock Exchange.
CIBC has the smallest international exposure of Canada's "big five" banks, making it particularly vulnerable to the expected lending slowdown in Canada, which is the result of a slowing housing market and caution on the part of already heavily indebted Canadians.
Like Bank of Montreal and Royal Bank of Canada , CIBC benefited from a sharp year-on-year rise in wholesale banking revenue as trading fees were up from the relatively weak year-earlier period.
Wholesale banking income rose 58 percent to C$193 million, helped by higher derivatives trading revenue.
"You take the trading impact out and you really had an in-line quarter when you look at the rest of the results," said Brian Klock, an analyst at Keefe, Bruyette & Woods.
Income from domestic retail banking, CIBC's largest division, fell 5 percent to C$569 million, as revenue was hurt by the decision to wind down FirstLine.
CIBC has said it hopes to retain more than half of its FirstLine business and move the mortgages into higher-rate CIBC-branded loans, and the bank is seeing retention rates above that level, said David Williamson, the bank's head of retail and business banking.
"The clients are showing a strong propensity to convert into the CIBC brand, so as far as conversions go, we're at this point significantly exceeding... the conversion target," he said on a conference call.
He also said the shutdown of FirstLine positioned the bank well in terms of its margins on loans, which has been a weak point for the CIBC's rivals this quarter.
Wealth management income at the bank rose 20 percent to C$84 million.