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Canadian Imperial Posts Robust 1Q

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Canadian Imperial Bank of Commerce (CM - Free Report) reported its fiscal first quarter 2013 (ended Jan 31) adjusted earnings per share of C$2.15. This was up 5.4% from the prior-quarter earnings of C$2.04.

Augmented top line and robust asset position were the primary earnings drivers. However, rising operating expenses partially marred the results.

After considering certain non-recurring items, net income for fiscal fourth quarter came in at C$798 million ($803.4 million), down 6.3% sequentially.

Behind the Headlines

Canadian Imperial’s total revenue stood at C$3.18 billion ($3.2 billion), up 0.7% from the prior quarter. Also, adjusted revenue came in at C$3.25 billion ($3.27 billion), improving 1.4% from the last quarter.

For the reported quarter, net interest income inched up 0.41% sequentially to C$1.86 billion ($1.87 billion). The increase was mainly due to higher trading-related net interest income and wider retail spreads, partly offset by lower treasury-related net interest income.

Non-interest revenue came in at C$1.33 billion ($1.34 billion), up 1.1% from the previous quarter.

Non-interest expenses reached C$2.0 billion ($2.01 billion), increasing 8.6% sequentially. Adjusted efficiency ratio stood at 56.1%, improving from 56.5% as of Jan 31, 2012. Decline in efficiency ratio indicates rise in profitability.

Total provision for credit losses were C$265 million ($266.8 million), down 19.2% from the last quarter.

Balance Sheet

Total assets came in at C$392.8 billion ($391.9 billion) as of Jan 31, 2013, slightly down by 0.2% from the prior-year period. Return on common shareholders’ equity was 19.9% in the reported quarter against 21.7% in the prior quarter and 22.4% in the year-ago period.

Dividend Update

Concurrent with the earnings release, Canadian Imperial declared a quarterly cash dividend of C$0.94 per share. The dividend is payable on Apr 30 to shareholders of record as of Mar 28.

Performance on Another Canadian Bank

The Toronto-Dominion Bank (TD - Free Report) reported its fiscal first quarter 2013 (ended Jan 31) adjusted earnings of C$2.00 per share, which compared favorably with the year-ago earnings of C$1.86. Improved results were driven by growth in revenue as well as strong assets and profitability ratio in the quarter. Yet, higher operating expenses were the primary headwinds.

Our Take

We expect that Canadian Imperial’s strong business model, diversified product mix and sturdy capital position will boost its bottom line. However, a persistent low interest rate environment, weak economic recovery and stringent regulatory requirements will remain a drag on its financials.

Canadian Imperial currently retains a Zacks Rank #3 (Hold). However, other foreign banks like Banco Bilbao Vizcaya Argentaria, S.A. (BBVA - Free Report) and Banco Macro S.A. (BMA - Free Report) carry a Zacks Rank #1 (Strong Buy) and are worth considering.

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