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Canadian Imperial (CM) Stock Up 2.2% Despite Q1 Earnings Fall
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Canadian Imperial Bank of Commerce’s (CM - Free Report) first-quarter fiscal 2024 (ended Jan 31) adjusted earnings per share of C$1.81 declined 7% from the prior-year quarter.
Results were adversely impacted by a significant rise in provisions and a decline in loan balance. However, a rise in revenues, lower expenses and a strong balance sheet position aided it. These positives seem to have cheered investors, as the CM stock gained 2.2% following the release.
After considering several non-recurring items, net income was C$1.73 billion ($1.28 billion), reflecting a year-over-year surge.
Revenues Improve, Costs Down
Total revenues were C$6.22 billion ($4.6 billion), up 5% year over year. The improvement was mainly driven by higher non-interest income.
Net interest income came in at C$3.25 billion ($2.41 billion), up 1% year over year. Non-interest income increased 9% to C$2.97 billion ($2.2 billion).
The adjusted efficiency ratio was 54% at the end of the reported quarter, down from 55.1% in the prior-year quarter. A decline in efficiency ratio indicates an improvement in profitability.
Provision for credit losses was C$585 million ($433 million), surging 98%.
Balance Sheet Strong
As of Jan 31, 2024, total assets were C$971.7 billion ($724.4 billion), down marginally from the prior quarter. Net loans and acceptances declined marginally to C$539.3 billion ($402 billion), while deposits grew slightly to C$724.5 billion ($540.1 billion).
Capital Ratios Improve, Profitability Ratio Deteriorate
As of Jan 31, 2024, the Common Equity Tier 1 ratio was 13% compared with 11.6% in the prior-year quarter. The Tier 1 capital ratio was 14.6% compared with 13.2% in the prior-year period. The total capital ratio was 17%, up from 15.6%.
Adjusted return on common shareholders’ equity was 12.8% at the end of the fiscal first quarter, down from the prior year’s 15.5%.
Our Take
Given higher interest rates and solid loan balance, Canadian Imperial is likely to witness steady improvement in revenues. However, a challenging operating backdrop and steadily increasing provisions remain near-term concerns.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
Royal Bank of Canada’s (RY - Free Report) fiscal first-quarter 2024 (ended Jan 31) adjusted net income of C$4.06 billion ($3.01 billion) decreased 5% from the prior-year quarter.
Results were adversely impacted by higher expenses and provisions. However, a rise in revenues and solid capital ratios acted as tailwinds for RY.
Bank of Montreal’s (BMO - Free Report) first-quarter fiscal 2024 (ended Jan 31) adjusted earnings per share of C$2.56 declined 16.3% year over year.
A significant rise in provision for credit losses, along with higher adjusted expenses, primarily hurt the results. However, increases in NII and non-interest income acted as tailwinds for BMO.
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Canadian Imperial (CM) Stock Up 2.2% Despite Q1 Earnings Fall
Canadian Imperial Bank of Commerce’s (CM - Free Report) first-quarter fiscal 2024 (ended Jan 31) adjusted earnings per share of C$1.81 declined 7% from the prior-year quarter.
Results were adversely impacted by a significant rise in provisions and a decline in loan balance. However, a rise in revenues, lower expenses and a strong balance sheet position aided it. These positives seem to have cheered investors, as the CM stock gained 2.2% following the release.
After considering several non-recurring items, net income was C$1.73 billion ($1.28 billion), reflecting a year-over-year surge.
Revenues Improve, Costs Down
Total revenues were C$6.22 billion ($4.6 billion), up 5% year over year. The improvement was mainly driven by higher non-interest income.
Net interest income came in at C$3.25 billion ($2.41 billion), up 1% year over year. Non-interest income increased 9% to C$2.97 billion ($2.2 billion).
Non-interest expenses totaled C$3.47 billion ($2.57 billion), decreasing 22%.
The adjusted efficiency ratio was 54% at the end of the reported quarter, down from 55.1% in the prior-year quarter. A decline in efficiency ratio indicates an improvement in profitability.
Provision for credit losses was C$585 million ($433 million), surging 98%.
Balance Sheet Strong
As of Jan 31, 2024, total assets were C$971.7 billion ($724.4 billion), down marginally from the prior quarter. Net loans and acceptances declined marginally to C$539.3 billion ($402 billion), while deposits grew slightly to C$724.5 billion ($540.1 billion).
Capital Ratios Improve, Profitability Ratio Deteriorate
As of Jan 31, 2024, the Common Equity Tier 1 ratio was 13% compared with 11.6% in the prior-year quarter. The Tier 1 capital ratio was 14.6% compared with 13.2% in the prior-year period. The total capital ratio was 17%, up from 15.6%.
Adjusted return on common shareholders’ equity was 12.8% at the end of the fiscal first quarter, down from the prior year’s 15.5%.
Our Take
Given higher interest rates and solid loan balance, Canadian Imperial is likely to witness steady improvement in revenues. However, a challenging operating backdrop and steadily increasing provisions remain 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
Royal Bank of Canada’s (RY - Free Report) fiscal first-quarter 2024 (ended Jan 31) adjusted net income of C$4.06 billion ($3.01 billion) decreased 5% from the prior-year quarter.
Results were adversely impacted by higher expenses and provisions. However, a rise in revenues and solid capital ratios acted as tailwinds for RY.
Bank of Montreal’s (BMO - Free Report) first-quarter fiscal 2024 (ended Jan 31) adjusted earnings per share of C$2.56 declined 16.3% year over year.
A significant rise in provision for credit losses, along with higher adjusted expenses, primarily hurt the results. However, increases in NII and non-interest income acted as tailwinds for BMO.