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Canadian Imperial (CM) Q3 Earnings Fall on Higher Provisions
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Canadian Imperial Bank of Commerce’s (CM - Free Report) third-quarter fiscal 2022 (ended Jul 31) adjusted earnings per share came in at C$1.85, down 6% from the prior-year quarter.
Results were adversely impacted by higher expenses and a rise in provisions. However, a rise in revenues, an improvement in loan demand and a strong balance sheet position acted as tailwinds.
After considering several non-recurring items, net income was C$1.67 billion ($1.30 billion), reflecting a 6% year-over-year decline.
Revenues & Costs Rise
Adjusted total revenues rose 10% year over year to C$5.57 billion ($4.35 billion). The improvement was driven by the higher net interest income and non-interest income.
Net interest income was C$3.24 billion ($2.53 billion), growing 12%. Non-interest income increased 8% to C$2.34 billion ($1.83 billion).
Adjusted non-interest expenses totaled C$3.1 billion ($2.42 billion), up 10%.
Adjusted efficiency ratio was 55.2% at the end of the reported quarter, rising from 55.1% as of Jul 31, 2021. An increase in the efficiency ratio indicates a deterioration in profitability.
Provision for credit losses was C$243 million ($189.8 million) against a provision benefit recorded in the prior-year quarter.
Strong Balance Sheet & Capital Ratios
Total assets were C$896.8 billion ($700.5 billion) as of Jul 31, 2022, up marginally from the prior quarter. Net loans and acceptances increased 3% to C$516.6 billion ($403.5 billion), while deposits grew 2% to C$678.5 billion ($530 billion).
As of Jul 31, 2022, Common Equity Tier 1 ratio was 11.8% compared with 12.3% in the prior-year quarter. Tier 1 capital ratio was 13.2%, compared with 13.7% in the prior-year period level. Total capital ratio was 15.3%, down from 16%.
Adjusted return on common shareholders’ equity was 15.1% at the end of the fiscal third quarter, down from the prior year’s 17.9%.
Our Take
Given the improving economy, rising rates and loan growth, Canadian Imperial is likely to witness a steady improvement in revenues. However, a challenging operating backdrop, steadily increasing provisions and rising expenses are near-term concerns.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
The Bank of Nova Scotia (BNS - Free Report) reported third-quarter fiscal 2022 (ended July 31) adjusted net income of C$2.61 billion ($2.04 billion), which rose 2% year over year. Results excluded certain one-time items.
Higher net interest income driven by rising rates and improving loan demand mainly supported the results. Moreover, the balance sheet position remained strong during the quarter. However, lower non-interest income and a rise in expenses were the headwinds. Further, an increase in provisions on worsening economic outlook hurt BNS’ financials.
Royal Bank of Canada’s (RY - Free Report) third-quarter fiscal 2022 (ended Jul 31) adjusted net income of C$3.56 billion ($2.78 billion) declined 16.8% from the prior-year quarter.
Results were adversely impacted by a rise in provisions, lower non-interest income on weak capital markets performance and a worsening economic backdrop. Also, RY’s capital ratios deteriorated during the quarter. However, a marginal fall in expenses, a rise in net interest income and solid loans and deposit balances acted as tailwinds.
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Canadian Imperial (CM) Q3 Earnings Fall on Higher Provisions
Canadian Imperial Bank of Commerce’s (CM - Free Report) third-quarter fiscal 2022 (ended Jul 31) adjusted earnings per share came in at C$1.85, down 6% from the prior-year quarter.
Results were adversely impacted by higher expenses and a rise in provisions. However, a rise in revenues, an improvement in loan demand and a strong balance sheet position acted as tailwinds.
After considering several non-recurring items, net income was C$1.67 billion ($1.30 billion), reflecting a 6% year-over-year decline.
Revenues & Costs Rise
Adjusted total revenues rose 10% year over year to C$5.57 billion ($4.35 billion). The improvement was driven by the higher net interest income and non-interest income.
Net interest income was C$3.24 billion ($2.53 billion), growing 12%. Non-interest income increased 8% to C$2.34 billion ($1.83 billion).
Adjusted non-interest expenses totaled C$3.1 billion ($2.42 billion), up 10%.
Adjusted efficiency ratio was 55.2% at the end of the reported quarter, rising from 55.1% as of Jul 31, 2021. An increase in the efficiency ratio indicates a deterioration in profitability.
Provision for credit losses was C$243 million ($189.8 million) against a provision benefit recorded in the prior-year quarter.
Strong Balance Sheet & Capital Ratios
Total assets were C$896.8 billion ($700.5 billion) as of Jul 31, 2022, up marginally from the prior quarter. Net loans and acceptances increased 3% to C$516.6 billion ($403.5 billion), while deposits grew 2% to C$678.5 billion ($530 billion).
As of Jul 31, 2022, Common Equity Tier 1 ratio was 11.8% compared with 12.3% in the prior-year quarter. Tier 1 capital ratio was 13.2%, compared with 13.7% in the prior-year period level. Total capital ratio was 15.3%, down from 16%.
Adjusted return on common shareholders’ equity was 15.1% at the end of the fiscal third quarter, down from the prior year’s 17.9%.
Our Take
Given the improving economy, rising rates and loan growth, Canadian Imperial is likely to witness a steady improvement in revenues. However, a challenging operating backdrop, steadily increasing provisions and rising expenses are near-term concerns.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
Canadian Imperial Bank of Commerce price-consensus-eps-surprise-chart | Canadian Imperial Bank of Commerce Quote
CM 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 Canadian Banks
The Bank of Nova Scotia (BNS - Free Report) reported third-quarter fiscal 2022 (ended July 31) adjusted net income of C$2.61 billion ($2.04 billion), which rose 2% year over year. Results excluded certain one-time items.
Higher net interest income driven by rising rates and improving loan demand mainly supported the results. Moreover, the balance sheet position remained strong during the quarter. However, lower non-interest income and a rise in expenses were the headwinds. Further, an increase in provisions on worsening economic outlook hurt BNS’ financials.
Royal Bank of Canada’s (RY - Free Report) third-quarter fiscal 2022 (ended Jul 31) adjusted net income of C$3.56 billion ($2.78 billion) declined 16.8% from the prior-year quarter.
Results were adversely impacted by a rise in provisions, lower non-interest income on weak capital markets performance and a worsening economic backdrop. Also, RY’s capital ratios deteriorated during the quarter. However, a marginal fall in expenses, a rise in net interest income and solid loans and deposit balances acted as tailwinds.