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Canadian Imperial Bank of Commerce reported fiscal third-quarter 2013 (ended Jul 31) adjusted earnings per share of C$2.16. This was 8.0% higher than C$2.00 earned in the prior-year quarter.

An augmented top-line was the primary growth driver. However, rising operating expenses and a slight deterioration in asset position as well as credit quality partially marred the results.

After considering certain non-recurring items, net income came in at C$890 million ($863.3 million), up 5.8% year over year.

Performance in Detail

Canadian Imperial’s total revenue came in at C$3.26 billion ($3.16 billion), up 3.6% from the prior-year quarter. Additionally, adjusted revenues came in at C$3.36 billion ($3.26 billion), up 3.6% year over year.

For the reported quarter, net interest income (NII) was C$1.88 billion ($1.82 billion), in line with the prior-year quarter.

Non-interest income came in at C$1.38 billion ($1.34 billion), up 9.0% from the previous-year quarter. The rise was mainly due to an increase in fee revenues and trading income, partially offset by a fall in profits on available-for-sale securities.

Non-interest expenses reached C$1.87 billion ($1.81 billion), increasing 2.3% year over year. Adjusted efficiency ratio was 55.6%, down from 56.1% as of Jul 31, 2012. A fall in efficiency ratio indicates increased profitability.

Total provision for credit losses were C$320 million ($310.4 million), nudging up 1% from the prior-year quarter.

Total assets came in at C$397.6 billion ($391.9 billion) as of Jul 31, 2013, down 0.9% from the prior-year period. Return on common shareholders’ equity was 21.6 % versus 22.8% in the year-ago quarter and 22.3% in the prior quarter.

Capital Deployment Activities

Along with its earnings release, Canadian Imperial declared a quarterly cash dividend of C$0.96 per share. The dividend will be paid on Oct 28 to shareholders of record as of Sep 27.

Moreover, Canadian Imperial announced share buybacks in an attempt to reduce up to 8 million common shares comprising 2% of its issued and outstanding shares as of Aug 26.

Performance of Other Canadian Banks

The Toronto-Dominion Bank reported adjusted earnings of C$1.65 per share, which compared unfavorably with C$1.91 earned in the year-ago quarter. A decline in fee income and higher operating expenses were primarily responsible for the disappointing results. However, increased net interest income was among the positives.

Royal Bank of Canada reported net income of C$2.2 billion ($2.1 billion), beating the year-ago earnings by 12%. Results reflect a rise in net interest income as well as lower provisions for credit losses, partly offset by lower non-interest income and higher expenses.

Our Viewpoint

We expect Canadian Imperial’s strong business model, diversified product mix and sturdy capital position to boost its bottom line. Nevertheless, weak economic recovery and stringent regulatory requirements will continue to drag its financials.

Canadian Imperial currently carries a Zacks Rank #3 (Hold). A better performing bank is Grupo Financiero Galicia S.A. , which has a Zacks Rank #1 (Strong Buy).

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