CIBC’s profit declines as weaker retail banking, higher loan loss provisions hit results

Canadian Imperial Bank of Commerce CM-T reported lower fiscal gains for the second quarter and raised its quarterly dividend as weaker retail banking performance, higher loan loss provisions and higher spending lowered gains.

After two rival banks reported rising earnings on Wednesday, CIBC earnings per share were weaker than analysts had expected, even as revenue rose 9% year-on-year.

Canada’s fifth-largest bank earned $ 1.52 billion, or $ 1.62 a share, in the quarter ended April 30. That’s up from $ 1.65 billion, or $ 3.55 per share, in the same quarter last year – before the CIBC completed two per share was split earlier this month.

After adjusting for special items, including costs associated with CIBC’s acquisition of the Costco retailer’s credit card portfolio, CIBC said it earned $ 1.77 per share. On average, analysts expected adjusted earnings of $ 1.80 per share.

The bank raised its quarterly dividend by 2.5 cents a share to 83 cents.

Costco’s acquisition also increased provisions for credit losses – funds set aside by banks to cover loans that may not come out – which were $ 303 million in the quarter. That’s up from an unusually low $ 32 million a year earlier and includes a $ 94 million increase in Costco’s card portfolio.

The bank’s spending also rose nearly 13 percent to $ 3.1 billion, driven by higher performance-based pay, as well as business investment and inflationary pressures.

CIBC’s main Canadian personal and business banking division earned $ 496 million, down 18 percent from a year earlier due to higher provisions and loan loss costs.

Canada’s $ 480 million in Canadian commercial banking and wealth management rose 20 percent as revenue increased, but U.S. trade and wealth profits fell 17 percent to $ 180 million.

The bank’s capital markets department had a strong quarter with a profit of $ 540 million, driven by higher revenues from global markets and the direct financial services business.

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