Canadian Imperial (CM) Up As Q3 Earnings & Revenues Rise
Zacks Investment Research | Aug 23, 2019 07:08AM ET
Shares of Canadian Imperial Bank of Commerce (TSX:CM) rallied 2.3% on the NYSE following the release of third-quarter fiscal 2019 (ended Jul 31) results. The bank’s adjusted earnings per share were C$3.10, up 1% from the year-ago reported figure.
Results were driven by increase in non-interest income and net interest income. Also, rise in loans and deposits acted as a tailwind. However, significant rise in provisions and higher operating expenses were the undermining factors.
After considering several non-recurring items, net income was C$1.40 billion ($1.05 billion), reflecting a rise of 2% year over year.
Adjusted Revenues & Expenses Rise
Adjusted total revenues were up 4% year over year to C$4.77 billion ($3.59 billion). On a reported basis, total revenues came in at C$4.73 billion ($3.56 billion), reflecting an increase of 4%.
Net interest income was C$2.69 billion ($2.03 billion), up 5% from the year-ago quarter. The increase reflected rise in interest income, partially offset by higher interest expenses.
Non-interest income increased 3% year over year to C$2.04 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$2.64 billion ($1.99 billion), increasing 5% from the year-ago quarter.
Adjusted efficiency ratio was 55.4% at the end of the reported quarter, up from 55.0% as of Jul 31, 2018. Rise in efficiency ratio indicates decline in profitability.
Total provision for credit losses was up 21% year over year to C$291 million ($219.1 million).
Strong Balance Sheet & Capital Ratios
Total assets were C$642.5 billion ($486.9 billion) as of Jul 31, 2019, up 1% from the prior quarter. Net loans and acceptances grew nearly 1% sequentially to C$395.4 billion ($299.6 billion) and deposits rose nearly 1% to C$481 billion ($364.5 billion).
As of Jul 31, 2019, Common Equity Tier 1 ratio was 11.4%, up from 11.3% in the prior-year quarter. Furthermore, Tier 1 capital ratio was 12.7% compared with 12.8% as of Jul 31, 2018. Total capital ratio was 15.2%, up from 14.8%.
Adjusted return on common shareholders’ equity was 15.6% at the end of the reported quarter, down from 17.1% a year ago.
Dividend Hike
Concurrently, Canadian Imperial announced a quarterly dividend of C$1.44 per share, representing a hike of 2.9% from the prior payout. The dividend will be paid on Oct 28 to shareholders of record as on Sep 27.
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.
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