Canadian Imperial Bank of Commerce CM rallied 1.1% on the NYSE in response to first-quarter fiscal 2020 (ended Jan 31) results. The bank’s adjusted earnings per share were C$3.24, up 7.6% from the year-ago reported figure.
In the first fiscal quarter, Canadian Imperial recorded a $339 million ($255 million) restructuring charge, primarily relating to employee severance as it undertook layoffs and shuffled top management ranks.
Results were driven by increase in non-interest income and net interest income along with lower provisions. Also, rise in loans and deposits acted as a tailwind. However, higher operating expenses posed an undermining factor.
After considering several non-recurring items, net income was C$1.21 billion ($1.05 billion), reflecting a rise of 2.5% year over year.
Revenues & Adjusted Expenses Rise
Total revenues for the quarter were up 6.3% year over year to C$4.86 billion ($3.59 billion).
Net interest income was C$2.76 billion ($2.03 billion), up 6.4% from the year-ago quarter. The increase reflected rise in interest income and lower interest expenses.
Non-interest income increased 6.3% year over year to C$2.09 billion ($1.54 billion). The rise was mainly driven by credit fees, investment management and custodial fees, and mutual fund fees.
Adjusted non-interest expenses totaled C$2.7 billion ($1.99 billion), increasing 7.9% from the year-ago quarter.
Adjusted efficiency ratio was 55% at the end of the reported quarter, up from 54.4% as of Jan 31, 2019. Rise in efficiency ratio indicates decline in profitability.
Total provision for credit losses was down 22.8% year over year to C$261 million ($219.1 million).
Strong Balance Sheet & Capital Ratios
Total assets were C$672.1 billion ($486.9 billion) as of Jan 31, 2020, up 3.1% from the prior quarter. Net loans and acceptances grew nearly 1% sequentially to C$402.5 billion ($299.6 billion) and deposits rose 2.5% to C$497.9 billion ($364.5 billion).
As of Jan 31, 2020, Common Equity Tier 1 ratio was 11.3%, up from 11.2% in the prior-year quarter. Furthermore, Tier 1 capital ratio was 12.5% compared with 12.7% as of Jan 31, 2019. Total capital ratio was 14.5%, down from 14.7%.
Adjusted return on common shareholders’ equity was 16.1% at the end of the reported quarter, up from 16% a year ago.
Concurrently, Canadian Imperial announced a quarterly dividend of C$1.46 per share, representing a hike of 1.4% from the prior payout.
Given an improving economy and loan growth, Canadian Imperial is expected to witness steady improvement in revenues. However, elevated expenses and a challenging operating backdrop remain major concerns.
Canadian Imperial Bank of Commerce Price and EPS Surprise
Canadian Imperial currently carries a Zacks Rank #3 (Hold). You can see
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