CIBC profit gets boost from PrivateBancorp acquisition

TORONTO (Reuters) - Canadian Imperial Bank of Commerce CM.TO reported first-quarter earnings that exceeded market expectations, helped by a strong performance in all business units and expansion in the United States.

FILE PHOTO: The Canadian Imperial Bank of Commerce (CIBC) logo is seen outside their Bay Street headquarters in Toronto, Ontario, Canada March 16, 2017. REUTERS/Chris Helgren/File Photo

Chief Executive Victor Dodig said in December the U.S. contribution to earnings was expected to nearly double in the next three years. Canada’s fifth-biggest lender purchased Chicago-based PrivateBancorp for $5 billion last June.

The bank’s U.S. business earned a quarterly net income of C$134 million ($105 million), more than four times the amount in the same period a year earlier. The quarter was the second in which PrivateBancorp has contributed to earnings.

Chief Financial Officer Kevin Glass said the integration of PrivateBancorp was going well and CIBC was focusing on growing its U.S. business organically rather than through more acquisitions.

“We’d like to make sure that we bed this down,” he said in an interview.

Prior to the PrivateBancorp acquisition, CIBC had derived a higher proportion of its earnings from its home market than other large Canadian banks. Analysts had said this left it exposed amid increasing concerns that red-hot housing markets in Toronto and Vancouver could decline.

Shares in CIBC were up 1.8 percent in morning trading. The stock has slipped 4.5 percent this year so far.

“We expect CIBC shares to make up some ground today, given their discount valuation and year-to-date underperformance,” said Eight Capital analyst Steve Theriault.

The bank’s residential mortgage book has been growing faster than those of its rivals, and CIBC has seen its home loan portfolio as a means through which it could cross-sell other products. However, the pace of growth has been slowing since last summer and the bank expects that trend to continue.

Canada introduced stricter mortgage rules in January, requiring borrowers taking out uninsured mortgages to be stress-tested to determine their ability to make repayments at a rate 200 basis points above their contracted mortgage.

Glass said it was too early to tell what the impact of the new rules would be.

CIBC reported earnings per share, excluding one-off items, that rose to C$3.18 in the quarter ended Jan. 31, compared with C$2.89 a year earlier. Analysts had, on average, forecast C$2.83 a share, according to Thomson Reuters I/B/E/S data.

Net income, excluding one-off items, was C$1.4 billion, against C$1.2 billion a year ago.

The bank reported a 3 cent rise in its quarterly dividend to C$1.33.

Reporting by Matt Scuffham; Editing by Bernadette Baum