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Canadian Imperial (CM) Q4 Earnings Increase, Stock Down 3.4%
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Canadian Imperial Bank of Commerce’s (CM - Free Report) fourth-quarter fiscal 2018 (ended Oct 31) adjusted earnings per share came in at C$3.00, up 7% from the prior-year quarter.
Despite improved year-over-year performance, shares of the company declined 3.4% on NYSE, as management commentary related to earnings growth for the next year disappointed the investors. Management projects fiscal 2019 earnings growth to be at the lower end of the 5-10% range. Dismal quarterly performance on a sequential basis may perhaps be a reason for the share price decline too.
The improved results were driven by growth in both net interest and non-interest income. Furthermore, a strong balance-sheet position supported the results. However, an increase in expenses and higher provisions were the undermining factors.
After considering several non-recurring items, net income in the reported quarter came in at C$1.27 billion ($0.97 billion), reflecting a 9% year-over-year increase.
In fiscal 2018, adjusted earnings of C$12.21 per share grew 10% year over year. Further, net income (on a reported basis) increased 12% from a year ago to C$5.28 billion.
Revenues Improve, Costs Rise
Adjusted total revenues grew 6% year over year to C$4.53 billion ($3.48 billion). On a reported basis, total revenues came in at C$4.45 billion ($3.41 billion), indicating an increase of 4% from the prior-year quarter.
Net interest income was C$2.53 billion ($1.94 billion), up 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% year over year to C$1.91 billion ($1.47 billion).
Adjusted non-interest expenses totaled C$2.55 billion ($1.96 billion), rising 5% from the year-ago quarter.
Total provision for credit losses rose 15% year over year to C$264 million ($202.5 million).
Improving Balance Sheet & Capital Ratios
Total assets came in at C$597.1 billion ($453.8 billion) as of Oct 31, 2018, up marginally from the fiscal third-quarter level. Net loans and acceptances grew 1% sequentially to C$381.7 billion ($290.1 billion), and deposits recorded a slight increase to C$461 billion ($350.3 billion).
On Oct 31, 2018, Common Equity Tier 1 ratio came in at 11.4% compared with 10.6% as of the same date in 2017. Tier 1 capital ratio was 12.9% compared with 12.1% as of Oct 31, 2017. Total capital ratio was 14.9%, improving from 13.8% in the prior-year quarter.
Adjusted return on common shareholders’ equity was 16.4% at the end of the quarter, down from 17.2% a year ago.
Our Viewpoint
Given the gradual improvement in loan demand, Canadian Imperial is expected to witness a steady rise in revenues. Also, the acquisition of PrivateBancorp expanded its private banking and wealth management capabilities in the United States.
However, persistently rising expenses remain a major near-term concern for the company. Further, ongoing global economic certainty and trade war-related concerns make us apprehensive.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
UBS Group AG (UBS - Free Report) reported third-quarter 2018 net profit attributable to shareholders of CHF 1.2 billion ($1.2 billion), up around 31.7% from the prior-year quarter. The results display a rise in net fee and commission income, along with lower net interest income. Further, the company’s performance in the quarter reflects lower expenses.
Deutsche Bank AG (DB - Free Report) reported net income of €229 million ($267.4 million) in third-quarter 2018, which tanked 64.7% from the year-ago quarter. Income before taxes plunged 45.8% from a year ago to €506 million ($590.9 million). Lower revenues and higher expenses were the key undermining factors. However, strong capital position and lower provisions were the main positives.
Barclays (BCS - Free Report) reported third-quarter 2018 net income attributable to ordinary equity holders of £1 billion ($1.30 billion). The results were driven by improvement in trading activities and a decline in credit impairment charges. However, a fall in net interest income and higher expenses acted as headwinds.
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Canadian Imperial (CM) Q4 Earnings Increase, Stock Down 3.4%
Canadian Imperial Bank of Commerce’s (CM - Free Report) fourth-quarter fiscal 2018 (ended Oct 31) adjusted earnings per share came in at C$3.00, up 7% from the prior-year quarter.
Despite improved year-over-year performance, shares of the company declined 3.4% on NYSE, as management commentary related to earnings growth for the next year disappointed the investors. Management projects fiscal 2019 earnings growth to be at the lower end of the 5-10% range. Dismal quarterly performance on a sequential basis may perhaps be a reason for the share price decline too.
The improved results were driven by growth in both net interest and non-interest income. Furthermore, a strong balance-sheet position supported the results. However, an increase in expenses and higher provisions were the undermining factors.
After considering several non-recurring items, net income in the reported quarter came in at C$1.27 billion ($0.97 billion), reflecting a 9% year-over-year increase.
In fiscal 2018, adjusted earnings of C$12.21 per share grew 10% year over year. Further, net income (on a reported basis) increased 12% from a year ago to C$5.28 billion.
Revenues Improve, Costs Rise
Adjusted total revenues grew 6% year over year to C$4.53 billion ($3.48 billion). On a reported basis, total revenues came in at C$4.45 billion ($3.41 billion), indicating an increase of 4% from the prior-year quarter.
Net interest income was C$2.53 billion ($1.94 billion), up 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% year over year to C$1.91 billion ($1.47 billion).
Adjusted non-interest expenses totaled C$2.55 billion ($1.96 billion), rising 5% from the year-ago quarter.
Total provision for credit losses rose 15% year over year to C$264 million ($202.5 million).
Improving Balance Sheet & Capital Ratios
Total assets came in at C$597.1 billion ($453.8 billion) as of Oct 31, 2018, up marginally from the fiscal third-quarter level. Net loans and acceptances grew 1% sequentially to C$381.7 billion ($290.1 billion), and deposits recorded a slight increase to C$461 billion ($350.3 billion).
On Oct 31, 2018, Common Equity Tier 1 ratio came in at 11.4% compared with 10.6% as of the same date in 2017. Tier 1 capital ratio was 12.9% compared with 12.1% as of Oct 31, 2017. Total capital ratio was 14.9%, improving from 13.8% in the prior-year quarter.
Adjusted return on common shareholders’ equity was 16.4% at the end of the quarter, down from 17.2% a year ago.
Our Viewpoint
Given the gradual improvement in loan demand, Canadian Imperial is expected to witness a steady rise in revenues. Also, the acquisition of PrivateBancorp expanded its private banking and wealth management capabilities in the United States.
However, persistently rising expenses remain a major near-term concern for the company. Further, ongoing global economic certainty and trade war-related concerns make us apprehensive.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise | Canadian Imperial Bank of Commerce Quote
Zacks Rank
Canadian Imperial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
UBS Group AG (UBS - Free Report) reported third-quarter 2018 net profit attributable to shareholders of CHF 1.2 billion ($1.2 billion), up around 31.7% from the prior-year quarter. The results display a rise in net fee and commission income, along with lower net interest income. Further, the company’s performance in the quarter reflects lower expenses.
Deutsche Bank AG (DB - Free Report) reported net income of €229 million ($267.4 million) in third-quarter 2018, which tanked 64.7% from the year-ago quarter. Income before taxes plunged 45.8% from a year ago to €506 million ($590.9 million). Lower revenues and higher expenses were the key undermining factors. However, strong capital position and lower provisions were the main positives.
Barclays (BCS - Free Report) reported third-quarter 2018 net income attributable to ordinary equity holders of £1 billion ($1.30 billion). The results were driven by improvement in trading activities and a decline in credit impairment charges. However, a fall in net interest income and higher expenses acted as headwinds.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
See them today for free >>