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setUoYouRPROFILE's blog: "tufui"

created on 08/25/2011  |  http://fubar.com/tufui/b343104

Canadian Imperial Bank of Commerce, (CM-T76.403.344.57%) which retreated from the U.S. market amid heavy losses in order to retool its strategy, has found a sweet spot at home. The bank that has given investors very little to get excited about in recent years posted a surprise 26-per-cent increase in third-quarter earnings that beat analysts’ expectations. Perhaps more unexpected,longchamp outlet though, is that CIBC appears to be gaining ground in the Canadian lending business, where competition is rising as banks fight for borrowers in a slower economy. Across the sector, banks have been reporting a squeeze on interest margins – the difference between the rate they pay on deposits and what they collect on loans. CIBC was no different, but it managed to increase loan volumes. The bank reported a profit of $808-million, or $1.89 a share, compared with earnings of $640-million, or $1.53, during the same period last year. Revenue rose 7 per cent to $3.06-billion. “We are very pleased with the solid results we delivered this quarter in what continues to be a challenging economic environment worldwide,” CIBC chief executive officer Gerry McCaughey said in a statement Wednesday. CIBC hiked its quarterly dividend to 90 cents – its first increase since 2007, when it began to suffer huge losses on U.S. investments. The increase of three cents also caught markets by surprise, and was seen as a small but symbolic gesture that signalled confidence about the bank’s future profits. “Results were good, particularly in comparison to some of the other banks,” analyst John Reucassel at BMO Capital Markets said in a research note. “The dividend increase was also a surprise to us and a positive endorsement from the bank as to the sustainability of current earnings.” Bank of Montreal is now the only Canadian lender to not have boosted its payout since the financial crisis. CIBC, which is Canada’s fifth-largest bank by assets with more than $350-billion, has spent the past several years whittling down its international operations and lowering its appetite for risk after a few high profile missteps, including a multibillion-dollar loss on U.S. mortgage securities. However, though profits were up in the quarter, one potential trouble spot is how the bank is generating some of its growth on loans. CIBC managed to boost loan volumes in a tough market, and analysts say the bank appears to be undercutting its rivals on rates. That puts pressure on interest margins at a time when they are already tight. David Williamson, group head of retail and business banking at CIBC, said the bank is getting growth of at least 10 per cent in business lending and deposits, which is strong compared to other lenders. However, that comes on the back of a slide in net interest margins, suggesting that CIBC is having to surrender some profit in order to attract customers. CIBC’s quarterly profit beat analysts expectations of about $1.81 a share. The bank’s Canadian retail banking division was the biggest source of profits, earning $539-million, up 3 per cent from a year ago. CIBC’s wholesale banking division made $145-million, up significantly from net income of $25-million last year, when the bank took a big loss on so-called “structured credit” investments. However, given the upheaval in global markets, some analysts are cooling their expectations for earnings in that business. “With still challenging capital market conditions, and continued equity market volatility, we have lowered our forecasts for trading revenues and brokerage commissions,” analyst John Aiken at Barclays Capital said in a research note. CIBC reported a $56-million profit in its corporate segment, which includes its Caribbean banking operations. That compared to net income of $36-million a year ago. Profit at the bank’s wealth management operations were $68-million, up 28 per cent from a year ago when those same assets made $53-million. It is the first time CIBC has reported wealth management earnings as a separate business segment. CIBC has been expanding its wealth management capacity, including an agreement in the third quarter to buy 41 per cent of U.S.-based asset manager American Century Investments for $848-million (U.S.). Mr. McCaughey said the bank has received regulatory approvals for that acquisition, which should close soon. “Our investment in American Century announced this quarter and dividend increase announced today reflect our confidence and underscore our commitment to growing CIBC, while maintaining prudent capital ratios,” Mr. McCaughey said. Provisions for credit losses, or the amount banks set aside to cover bad loans, fell to $195-million in the quarter, from $221-million a year ago, and were flat compared with the previous quarter when they were $194-million.

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