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Canadian Imperial (CM) Q1 Earnings Improve, Stock Down 2.3%

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Canadian Imperial Bank of Commerce (CM - Free Report) reported first-quarter fiscal 2021 (ended Jan 31) results wherein adjusted earnings per share came in at C$3.58, up 10% from the prior-year quarter.

Results benefited from rise in revenues and lower provisions. Further, strong balance sheet position during the quarter supported the results. However, a slight rise in costs was the headwind. This was perhaps the reason that led the shares of Canadian Imperial 2.3% to fall on the NYSE following the release late last week.

After considering several non-recurring items, net income was C$1.63 billion ($1.27 billion), reflecting growth of 34% year over year.

Revenues & Costs Rise

Adjusted total revenues rose 2% year over year to C$5 billion ($3.88 billion). The improvement was driven by higher non-interest and net interest income.

Net interest income was C$2.84 billion ($2.21 billion), increasing 3% from the year-ago quarter. Non-interest income rose 1% to C$2.12 billion ($1.65 billion).

Adjusted non-interest expenses totaled C$2.73 billion ($2.12 billion), up slightly.

Adjusted efficiency ratio was 53.9% at the end of the reported quarter, down from 55% as of Jan 31, 2020. A fall in the efficiency ratio indicates an improvement in profitability.

Total provision for credit losses declined 43.7% year over year to C$147 million ($114.2 million).

Strong Balance Sheet & Capital Ratios

Total assets were C$782.9 billion ($612.6 billion) as of Jan 31, 2021, up 2% from the prior-quarter level. Net loans and acceptances increased 1% to C$421 billion ($329.4 billion), while deposits climbed slightly to C$573.9 billion ($449.1 billion), on a sequential basis.

As of Jan 31, 2021, Common Equity Tier 1 ratio was 12.3%, up from 11.3% in the prior-year quarter. Further, Tier 1 capital ratio was 13.8% compared with 12.5% as of Jan 31, 2020. Total capital ratio was 15.8%, up from 14.5%.

Adjusted return on common shareholders’ equity was 17.2% at the end of the fiscal first quarter, up from the prior year’s 16.1%.

Our Take

Given anticipations of an improving economy and loan growth, Canadian Imperial is likely to witness steady improvement in revenues. However, low interest rates and a challenging operating backdrop are major near-term concerns.

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Performance of Other Canadian Banks

The Bank of Nova Scotia (BNS - Free Report) reported first-quarter fiscal 2021 (ended Jan 31) adjusted net income of C$2.4 billion ($1.9 billion), up 3.2% year over year. Decline in provisions and expenses were positives. However, decline in revenues was discouraging.

Bank of Montreal’s (BMO - Free Report) first-quarter fiscal 2021 (ended Jan 31) adjusted net income came in at C$2.04 billion ($1.58 billion), up 26% year over year. The company recorded improvement in revenues, lower provisions and a decline in expenses, which supported results.

Toronto-Dominion Bank’s (TD - Free Report) adjusted net income in the first quarter fiscal 2021 (ended Jan 31) climbed 10% from the prior-year quarter to C$3.38 billion ($2.63 billion). Results were supported by higher non-interest income and decline in provisions. However, fall in loan balance and lower net interest income were headwinds.

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