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Canadian Imperial (CM): Q2 Earnings and Revenues Strong
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Canadian Imperial Bank of Commerce (CM - Free Report) reported second-quarter fiscal 2016 earnings (ended Apr 30) on May 26. Adjusted earnings per share came in at C$2.40, up from C$2.28 in the prior-year quarter.
Revenues were driven by strong performance of the Retail and Business Banking along with Capital Markets divisions. Further, lower efficiency ratio and a strong balance sheet acted as tailwinds. However, an increase in provision for credit losses and expenses was an undermining factor.
After considering several non-recurring items, reported net income in the quarter rose 3.3% year over year to C$941 million ($709.2 million).
Performance in Detail
Adjusted total revenue increased 5.7% year over year to C$3.7 billion ($2.8 billion). On a reported basis, total revenue was C$3.6 billion ($2.7 billion), up 5.9% from the prior-year quarter.
Net interest income was C$2.0 billion ($1.51 billion), up 5.3% from the year-ago quarter. The improvement reflected a rise in interest income, partly offset by higher interest expenses.
Non-interest income increased 6.7% year over year to C$1.6 billion ($1.21 billion). The upside was due to rise in all fee income components, except underwriting and advisory fees, card fees, mutual fund fees, commissions on securities transactions, net AFS securities gains and income from equity-accounted associates and joint ventures.
Non-interest expenses totaled C$2.2 billion ($1.66 billion), up 4.8% from the year-ago quarter. The rise was largely due to increase in almost all expense items.
The adjusted efficiency ratio was 58.0%, down from 59.6% in the prior-year quarter. A fall in the efficiency ratio indicates improved profitability.
Total provision for credit losses jumped 64.5% year over year to C$324 million ($244.2 million). Loan loss ratio was 0.38%, up 8 basis points from the year-ago quarter.
Balance Sheet and Ratios
Total assets came in at C$478.1 billion ($381.4 billion) as of Apr 30, 2016, up 8.9% from the prior-year quarter. Loans and acceptances (net of allowance) increased 9.9% year over year to C$303.8 billion ($242.4 billion), while deposits grew 8.1% year over year to C$368.7 billion ($294.1 billion).
Adjusted return on common shareholders’ equity was 18.4% at the end of the quarter, down from 20.2% in the year-ago quarter.
As of Apr 30, 2016, Basel III Common Equity Tier 1 ratio came in at 10.4% compared with 10.8% as of Apr 30, 2015. Further, Tier 1 capital ratio was 11.9% compared with 12.6% as of Apr 30, 2015. Total capital ratio was 13.9%, down from 15.3% in the prior-year quarter.
Dividend
Along with the earnings release, Canadian Imperial announced a quarterly cash dividend of C$1.21 per share, representing a 2.5% hike from the prior payout. The dividend will be paid on Jul 28, 2016, to shareholders of record as of Jun 28, 2016.
Our Viewpoint
The second-quarter performance has been a decent one by Canadian Imperial in at a time when banks in Canada are encountering a number of challenges, including a low rate environment, a stressed energy sector and a weak economy.
Slow growth in interest income and limited avenues for earning fee income keep us apprehensive regarding the company’s near-term performance. Also, rising provision for credit losses is a major headwind.
Canadian Imperial currently carries a Zacks Rank #2 (Buy).
Competitive Landscape
Royal Bank of Canada (RY - Free Report) reported second-quarter fiscal 2016 (ended Apr 30) net income of C$2.6 billion ($1.96 billion), up 3% from the prior-year quarter. Excluding one-time items in the prior-year quarter, net income was up 7%. Elevated loans and deposits balances along with higher revenues reflected organic growth. However, a rise in non-interest expenses and provisions were a concern.
The Royal Bank of Scotland Group plc reported first-quarter 2016 loss attributable to shareholders of £968 million ($1.4 billion) as compared with a loss of £459 million in the prior-year quarter. Results included payment of the final Dividend Access Share (DAS) dividend of £1,193 million to the U.K. Government.
UBS Group AG (UBS - Free Report) reported first-quarter 2016 net profit attributable to shareholders of CHF 707 million ($711.7 million), down 64.2% year over year. The results were impacted by a 53% year-over-year decrease in net trading income and 7% drop in net fee and commission income, partially offset by a 5% increase in net interest income.
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Canadian Imperial (CM): Q2 Earnings and Revenues Strong
Canadian Imperial Bank of Commerce (CM - Free Report) reported second-quarter fiscal 2016 earnings (ended Apr 30) on May 26. Adjusted earnings per share came in at C$2.40, up from C$2.28 in the prior-year quarter.
Revenues were driven by strong performance of the Retail and Business Banking along with Capital Markets divisions. Further, lower efficiency ratio and a strong balance sheet acted as tailwinds. However, an increase in provision for credit losses and expenses was an undermining factor.
After considering several non-recurring items, reported net income in the quarter rose 3.3% year over year to C$941 million ($709.2 million).
Performance in Detail
Adjusted total revenue increased 5.7% year over year to C$3.7 billion ($2.8 billion). On a reported basis, total revenue was C$3.6 billion ($2.7 billion), up 5.9% from the prior-year quarter.
Net interest income was C$2.0 billion ($1.51 billion), up 5.3% from the year-ago quarter. The improvement reflected a rise in interest income, partly offset by higher interest expenses.
Non-interest income increased 6.7% year over year to C$1.6 billion ($1.21 billion). The upside was due to rise in all fee income components, except underwriting and advisory fees, card fees, mutual fund fees, commissions on securities transactions, net AFS securities gains and income from equity-accounted associates and joint ventures.
Non-interest expenses totaled C$2.2 billion ($1.66 billion), up 4.8% from the year-ago quarter. The rise was largely due to increase in almost all expense items.
The adjusted efficiency ratio was 58.0%, down from 59.6% in the prior-year quarter. A fall in the efficiency ratio indicates improved profitability.
Total provision for credit losses jumped 64.5% year over year to C$324 million ($244.2 million). Loan loss ratio was 0.38%, up 8 basis points from the year-ago quarter.
Balance Sheet and Ratios
Total assets came in at C$478.1 billion ($381.4 billion) as of Apr 30, 2016, up 8.9% from the prior-year quarter. Loans and acceptances (net of allowance) increased 9.9% year over year to C$303.8 billion ($242.4 billion), while deposits grew 8.1% year over year to C$368.7 billion ($294.1 billion).
Adjusted return on common shareholders’ equity was 18.4% at the end of the quarter, down from 20.2% in the year-ago quarter.
As of Apr 30, 2016, Basel III Common Equity Tier 1 ratio came in at 10.4% compared with 10.8% as of Apr 30, 2015. Further, Tier 1 capital ratio was 11.9% compared with 12.6% as of Apr 30, 2015. Total capital ratio was 13.9%, down from 15.3% in the prior-year quarter.
Dividend
Along with the earnings release, Canadian Imperial announced a quarterly cash dividend of C$1.21 per share, representing a 2.5% hike from the prior payout. The dividend will be paid on Jul 28, 2016, to shareholders of record as of Jun 28, 2016.
Our Viewpoint
The second-quarter performance has been a decent one by Canadian Imperial in at a time when banks in Canada are encountering a number of challenges, including a low rate environment, a stressed energy sector and a weak economy.
Slow growth in interest income and limited avenues for earning fee income keep us apprehensive regarding the company’s near-term performance. Also, rising provision for credit losses is a major headwind.
Canadian Imperial currently carries a Zacks Rank #2 (Buy).
Competitive Landscape
Royal Bank of Canada (RY - Free Report) reported second-quarter fiscal 2016 (ended Apr 30) net income of C$2.6 billion ($1.96 billion), up 3% from the prior-year quarter. Excluding one-time items in the prior-year quarter, net income was up 7%. Elevated loans and deposits balances along with higher revenues reflected organic growth. However, a rise in non-interest expenses and provisions were a concern.
The Royal Bank of Scotland Group plc reported first-quarter 2016 loss attributable to shareholders of £968 million ($1.4 billion) as compared with a loss of £459 million in the prior-year quarter. Results included payment of the final Dividend Access Share (DAS) dividend of £1,193 million to the U.K. Government.
UBS Group AG (UBS - Free Report) reported first-quarter 2016 net profit attributable to shareholders of CHF 707 million ($711.7 million), down 64.2% year over year. The results were impacted by a 53% year-over-year decrease in net trading income and 7% drop in net fee and commission income, partially offset by a 5% increase in net interest income.
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