(Bloomberg) -- Canadian Imperial Bank of Commerce beat estimates after another quarter of stronger-than-expected credit quality, with its US business showing signs that it’s getting over its problems in commercial real estate. The shares rose, hitting an all-time high of C$94.20 before retreating slightly.
The Toronto-based bank earned C$1.91 per share on an adjusted basis in the fiscal fourth quarter, topping the C$1.79 average estimate of analysts in a Bloomberg survey.
The bank set aside C$419 million ($298 million) for credit losses, much less than the C$547 million analysts had forecast and down 23% from the same period in 2023. For Canada’s fifth-largest bank, that continues a trend that began earlier in the year.
In May, the bank struck agreements to sell $316 million of US office loans at a discount, a portfolio that had been a drag on earnings due to credit losses. Provisions for credit losses in the US commercial banking unit fell 67% in the fourth quarter from a year earlier, and net income quadrupled.
The credit picture improved despite a worsening economic outlook, and “we think we have the ability to absorb whatever challenges are coming while continuing to support our clients,” Chief Financial Officer Robert Sedran said in an interview. He cited the bank’s strong balance sheet, credit quality, liquidity and operating momentum.
Overall, the bank earned C$1.9 billion in the quarter ended Oct. 31, up 24% from the prior year, and posted a return on equity of 13.4%. Both figures are on an adjusted basis.
The bank also benefited from buoyant equity markets, posting a 24% increase in market-related fees — a category that includes mutual funds and other investment management fees — to C$2.1 billion. Excluding trading, those revenues were up 19%, according to the bank’s investor presentation.
For the fiscal year, CIBC’s overall revenue rose 10% and adjusted earnings grew 12% to C$7.3 billion. Every segment saw net income increases except capital markets, which was flat.
“It’s been broad-based revenue growth across all of our businesses and across all of our product lines,” Sedran said. “They also had good expense control on the quarter and on the year, and so posted some solidly positive operating leverage as well.”
CIBC raised its quarterly dividend by 7.8% to 97 Canadian cents a share. “The largest dividend increase to date should underscore management’s confidence in its outlook,” Jefferies analyst John Aiken wrote.
The bank revised its medium-term target for return on equity to 15% or better, from 16% or better, citing increased capital requirements from regulators.
“There is some work to do to get to the 15%-plus” target, Sedran told analysts. The bank will try to use multiple levers — boosting fee income, cross-selling to existing customers, removing costs and keeping a focus on credit. “We do think loan losses are a little bit elevated and should come down over time,” he said.
Sedran said the bank intends to continue its share buyback program and “deploy that capital fully.” CIBC shares rose 4.2% to C$93.30 as of 1:02 p.m. in Toronto.
The results are “a strong clean finish to the year,” RBC Capital Markets analyst Darko Mihelic said in a client note.
--With assistance from Christine Dobby.
(Updates with share price starting in first paragraph, CFO commentary starting in the fifth paragraph.)
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