Canadian Imperial Bank of Commerce’s (CM - Free Report) second-quarter fiscal 2018 (ended Apr 30) adjusted earnings per share came in at C$2.95, increasing from C$2.64 in the prior-year quarter.
Shares of Canadian Imperial declined 1.9% on the NYSE, perhaps owing to the dismal mortgage origination outlook. The company expects mortgage originations to plunge around 50% in the second half of fiscal 2018, due to the implementation of stringent lending rules. Further, overall mortgage growth is expected to be in the low single-digit rate.
Results improved due to growth in both net interest income 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 came in at C$1.32 billion ($1.04 billion), reflecting an increase of 26% year over year.
Revenues Improve, Costs Rise
Adjusted total revenues grew 15% year over year to C$4.41 billion ($3.46 billion). On a reported basis, total revenues came in at C$4.38 billion ($3.43 billion), indicating an increase of 18% from the prior-year quarter.
Net interest income was C$2.48 billion ($1.94 billion), up 18% from the year-ago quarter. The improvement reflected a rise in interest income, partly offset by higher interest expenses.
Non-interest income increased 19% year over year to C$1.90 billion ($1.49 billion).
Non-interest expenses totaled C$2.52 billion ($1.98 billion), rising 11% from the year-ago quarter.
Total provision for credit losses rose 18% year over year to C$212 million ($166.2 million).
Improving Balance Sheet, Capital Ratios Weaken
Total assets came in at C$590.54 billion ($460.15 billion) as of Apr 30, 2018, up nearly 1% from the prior quarter. Net loans and acceptances grew 2% sequentially to C$374.22 billion ($291.60 billion), while deposits rose roughly 1% to C$449.03 billion ($349.89 billion).
As of Apr 30, 2018, Common Equity Tier 1 ratio came in at 11.2% compared with 12.2% as of Apr 30, 2017. Further, Tier 1 capital ratio was 12.7% compared with 13.5% as of Apr 30, 2017. Total capital ratio was 15.1%, declining from 15.4% in the prior-year quarter.
Adjusted return on common shareholders’ equity was 17.4% at the end of the quarter, down from 18.1% in the year-ago quarter.
Given the improving economy and loan growth, Canadian Imperial is expected to witness a steady rise in revenues. Additionally, 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.
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 first-quarter 2018 net profit attributable to shareholders of CHF 1.5 billion ($1.6 billion), up around 19% from the prior-year quarter. Results displayed rise in net fee and commission income (up 3% year over year) and higher net interest income (up 3% year over year). However, the quarter reflected elevated expenses.
Barclays (BCS - Free Report) incurred first-quarter 2018 net loss attributable to ordinary equity holders of £764 million ($1.06 billion). Net income attributable to ordinary equity holders was £190 million ($248 million) in the prior-year quarter. A fall in interest income and muted underwriting fees acted as headwinds. However, lower expenses, rise in trading income and decline in credit impairment charges supported the results.
HSBC Holdings (HSBC - Free Report) recorded first-quarter 2018 pre-tax profit of $4.8 billion, down 4% year over year. Further, net income attributable to shareholders of $3.1 billion reflects 1% fall from the year-ago quarter. Results were adversely impacted by increase in operating expenses as the company continued to invest in growth programs. On the other hand, higher revenues and a decline in loan impairment charges acted as tailwinds.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>