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Canadian Imperial (CM) Up as Q1 Earnings & Revenues Rise

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Shares of 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.

Dividend Hike

Concurrently, Canadian Imperial announced a quarterly dividend of C$1.46 per share, representing a hike of 1.4% from the prior payout.

Our Viewpoint

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 the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

HSBC Holdings (HSBC - Free Report) recorded a pre-tax loss of $3.9 billion in fourth-quarter 2019 against a pre-tax profit of $3.3 billion reported in the prior-year quarter. The pre-tax loss was primarily impacted by a goodwill impairment charge of $7.3 billion and a U.K. bank levy charge of $1 billion.

Barclays BCS reported fourth-quarter 2019 net income attributable to ordinary equity holders of £681 million ($877.4 million). This reflects a marked improvement from net loss attributable to ordinary equity holders of £14 million ($18 million) in the year-ago quarter.

Itau Unibanco Holding S.A. ITUB posted recurring earnings of R$7.3 billion ($1.77 billion) in fourth-quarter 2019, up 12.6% year over year. Including non-recurring items, net income came in at R$7.5 billion ($1.82 billion), up 20.6%.

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