Canadian Imperial's (CM) Q2 Earnings Improve, Stock Down
Zacks Investment Research | May 26, 2017 08:36AM ET
Canadian Imperial Bank of Commerce (TO:CM) reported second-quarter fiscal 2017 (ended Apr 30) adjusted earnings per share of C$2.64, up from C$2.40 in the prior-year quarter.
Results improved due to growth in revenues and a fall in provision for credit losses. Further, a strong balance sheet position supported the results. However, an increase in expenses was the undermining factor, which perhaps lead shares of the company to decline nearly 1.4%.
After considering several non-recurring items, net income came in at C$1.05 billion ($0.78 billion), reflecting an increase of 11.6% year over year.
Improved Revenues Offset Rise in Costs
Adjusted total revenue grew 3.5% year over year to C$3.83 billion ($2.88 billion). On a reported basis, total revenue came in at C$3.70 billion ($2.78 billion), reflecting an increase of 1.8% from the prior-year quarter.
Net interest income was C$2.10 billion ($1.58 billion), increasing 2.8% from the year-ago quarter. The improvement reflected a rise in interest income, partly offset by higher interest expenses.
Non-interest income increased marginally year over year to C$1.60 billion ($1.20 billion).
Adjusted non-interest expenses totaled C$2.26 billion ($1.70 billion), up 5.1% from the year-ago quarter.
Total provision for credit losses declined 44.8% year over year to C$179 million ($134.4 million).
Improving Balance Sheet, Capital Ratios Reflect Strength
Total assets came in at C$528.59 billion ($386.98 billion) as of Apr 30, 2017, up 3% from the prior quarter. Loans and acceptances (net of allowance) increased 2.7% sequentially to C$330.75 billion ($242.14 billion), while deposits grew nearly 1% to C$413.13 billion ($302.45 billion).
As of Apr 30, 2017, Basel III Common Equity Tier 1 ratio came in at 12.2% compared with 10.4% as of Apr 30, 2016. Further, Tier 1 capital ratio was 13.5% compared with 11.9% as of Apr 30, 2016. Total capital ratio was 15.4%, up from 13.9% in the prior-year quarter.
Adjusted return on common shareholders’ equity was 18.1% at the end of the quarter, reflecting a decline from 18.4% in the year-ago quarter.
Our Viewpoint
Canadian Imperial’s continuously rising expenses remain a major concern for the company in the near term. Also, slow growth in interest income and limited avenues for earning fee income keep us apprehensive about the company’s near-term performance. However, the company’s deal to acquire PrivateBancorp, Inc. (NASDAQ:PVTB) is likely to expand its private banking and wealth management capabilities in the U.S.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
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