Mr. Victor Dodig reports
CIBC ANNOUNCES FOURTH QUARTER AND FISCAL 2014 RESULTS
Canadian Imperial Bank of Commerce has released its results for the fourth quarter
and fiscal year ended Oct. 31, 2014.
Fourth-quarter highlights:
- Reported net income was $811-million, compared with $825-million for the
fourth quarter a year ago, and $921-million for the prior quarter.
- Adjusted net income was $911-million, compared with $894-million for the fourth quarter a
year ago, and $908-million for the prior quarter.
- Reported diluted earnings per share were $1.98, compared with $2.02
for the fourth quarter a year ago, and $2.26 for the prior quarter.
- Adjusted diluted EPS was $2.24, compared with $2.19 for the fourth quarter a year ago, and
$2.23 for the prior quarter.
- Reported return on common shareholders' equity was 17.9 per cent and
adjusted ROE was 20.1 per cent.
CIBC's results for the fourth quarter of 2014 were affected by the
following items of note aggregating to a negative impact of 26 cents per
share:
- $112-million ($82-million after tax or 21 cents per share) charge relating
to the incorporation of funding valuation adjustments into the
valuation of the bank's uncollateralized derivatives;
- $18-million ($13-million after tax or three cents per share) costs relating
to the development of the bank's enhanced travel rewards program and in
respect of the Aeroplan transactions with Aimia Canada Inc. and
Toronto-Dominion Bank;
- $10-million ($7-million after tax or two cents per share) amortization of
intangible assets;
- $2-million ($2-million after tax) gain from the structured credit
runoff business.
For the year ended Oct. 31, 2014, CIBC reported net income of $3.2-billion and record adjusted net income of $3.7-billion, compared with reported net income of $3.4-billion and
adjusted net income of $3.6-billion for 2013. Reported diluted EPS of $7.86 and adjusted
diluted EPS of $8.94 for 2014 compared with reported diluted EPS of $8.11 and
adjusted diluted EPS of $8.65 for 2013.
CIBC's adjusted ROE was 20.9 per cent for the year ended Oct. 31, 2014, and the Basel III common
equity Tier 1 ratio was 10.3 per cent as at Oct. 31, 2014.
CIBC announced a quarterly dividend increase of three cents per common share
to $1.03 per share.
"Our strong performance for the year was underpinned by record revenue,"
says Victor Dodig, CIBC president and chief executive officer. "Our
results show our client-focused strategies are delivering consistent
and sustainable earnings.
"In 2015, we will continue to strive to be the leading bank for our
clients," adds Mr. Dodig. "We will continue to invest in our businesses
to better serve our clients."
Core business performance
Retail and business banking reported net income of $2.5-billion in 2014,
up from $2.4-billion in 2013. Adjusting for items of note, net income
was $2.4-billion, comparable with the prior year.
Retail and business banking made strategic investments throughout 2014
in areas that are enhancing the relationship the bank has with, and the
value it provides to, its clients. Key highlights included:
- The first phase of the bank's branch-based technology platform called Compass
was rolled out to all of the bank's branches, enabling the bank's advisers to
strengthen and deepen relationships with new and existing clients.
Early results from the rollout are positive.
-
The bank continued to lead in delivering innovations for clients. CIBC was the
first of the Big Five banks to offer e-deposit and the first bank to
deliver a cheque capture solution for business clients. CIBC was also
recognized by Forrester Research for having the best mobile banking
offer among the Big Five banks.
Subsequent to the year-end, CIBC announced a pilot program with Brink's
Canada that will allow business clients to electronically deposit cash
into their CIBC business account while it is still on their premises.
The service uses a Brink's CompuSafe which securely reports cash
deposits to CIBC each business day, giving clients same-day credit for
cash they collect from customers, before those funds reach the bank.
"This year we continued to be leaders in innovation to enhance the
client experience, which contributed to deeper relationships with our
clients," says David Williamson, senior executive vice-president and group head, retail and
business banking. "We also invested in our retail franchise to
accelerate profitable revenue growth, and have delivered a number of
new products and services over the last year that have been very well
received by our clients."
Wealth management reported net income of $471-million in 2014, compared
with $385-million in 2013. Adjusting for items of note, net income of $486-million was up $97-million or 25 per cent from $389-million
in 2013.
Wealth management strengthened its business on many fronts in 2014 in
support of the bank's strategic priorities to attract and deepen client
relationships, seek new sources of domestic assets and pursue
acquisitions and investments. Key highlights included:
-
Completion of the acquisition of U.S. private wealth management firm
Atlantic Trust, which retained 99 per cent of its clients through the
transition and has increased assets by 28 per cent from the deal announcement;
- CIBC Investor's Edge made on-line investing even better for Canadians
with new lower commission rates of $6.95 for all clients, and $4.95 for
active traders;
- CIBC Asset Management achieved its fifth-consecutive sales record for
long-term mutual funds of $5.4-billion this year and surpassed the milestone of $100-billion in assets under management.
"Our wealth management businesses, including our 2014 acquisition of
Atlantic Trust, are all performing well," says Steve Geist, senior executive vice-president and
group head, wealth management. "We will continue to invest in our
platform in 2015 and beyond to enhance the client experience and
further increase wealth management's contribution to CIBC's overall
earnings."
Wholesale banking delivered strong results, reporting net income of $895-million, compared with $699-million in 2013. Adjusting for items of
note, net income of $913-million in 2014 compared with net income of $817-million in 2013.
Wholesale banking provides integrated credit and capital markets
products, investment banking advisory services and top-ranked research
to corporate, government and institutional clients around the world.
During 2014, wholesale banking was:
-
Named Canada Derivatives House Of The Year at the 2014 GlobalCapital
Americas Derivatives Awards;
- Ranked the No. 1 IPO underwriter in Canada by Bloomberg;
- Leader in Canadian equity trading including No. 1 in volume, value and
number of trades by IRESS Market Technology, Toronto Stock Exchange and alternative trading systems market share
report, 2009-present.
"In 2014 we continued to invest in our integrated suite of products and
services to benefit our clients," says Harry Culham, managing director
and group co-head, wholesale banking. "We are leveraging our industry
expertise to grow our global presence and support our clients as they
access capital, grow and invest in Canada and in key markets around the
world."
Strong fundamentals
While investing in core businesses, CIBC has continued to strengthen key
fundamentals. In 2014, CIBC maintained its capital strength,
competitive productivity and sound risk management practices:
- CIBC's capital ratios are strong, with a Basel III common equity Tier 1
ratio of 10.3 per cent, and Tier 1 and total capital ratios of 12.2 per cent and 15.5 per cent
at Oct. 31, 2014, respectively;
- Credit quality has improved, with CIBC's loan loss ratio of 38 basis
points compared with 44 basis points in 2013;
- Market risk, as measured by average value at risk, was $3.5-million in
2014 compared with $4.6-million in 2013.
Making a difference in the bank's communities
CIBC is committed to investing in the social and economic development of
communities across Canada. During the fourth quarter of 2014, CIBC:
- Helped raise $25-million through the 2014 Canadian Breast Cancer
Foundation CIBC Run for the Cure, including nearly $3-million
contributed by Team CIBC through pledges, fundraising activities and
donations to the CIBC Pink Collection;
- Announced a $1-million investment in the CIBC Breast Cancer Research
Scientist, an endowed scientist position at Mount Sinai Hospital's
prestigious Lunenfeld-Tanenbaum Research Institute in Toronto;
- Marked the one-year countdown to the Toronto 2015 Parapan Am Games with
the help of CIBC Team Next mentors and athletes, inspiring kids at
Variety Village and Holland-Bloorview Rehabilitation Centre to take
part in sport.
During the quarter, CIBC was ranked among the top-10 safest banks in
North America by Global Finance magazine and was also recognized by Mediacorp as one of Canada's top-100 employers for a third consecutive year. CIBC was once again named a
constituent of the following widely regarded indices:
- Dow Jones Sustainability World Index for a 13th consecutive year;
- FTSE4Good Index since 2001;
- Jantzi Social Index since 2000.
Review of retail and business banking fourth-quarter results
Net income was $602-million, down $11-million from the fourth quarter of
2013. Adjusted net income was $616-million, down $16-million from the fourth quarter of 2013.
Revenue of $2,050-million was down $37-million from the fourth quarter
of 2013. Excluding the impact of the sold Aeroplan portfolio, revenue
was up $78-million from the fourth quarter of 2013. Personal banking
and business banking revenue increased primarily due to volume growth
across most products and higher fees, partially offset by narrower
spreads. Other revenue was down primarily due to the sold Aeroplan
portfolio and lower revenue in the bank's exited FirstLine mortgage broker
business.
Provision for credit losses of $171-million was down $44-million from
the fourth quarter of 2013, mainly due to lower write-offs and
bankruptcies in the card portfolio, the impact of an initiative to
enhance account management practices as well as the sold Aeroplan
portfolio, and lower losses in the business lending portfolio.
Non-interest expenses of $1,076-million were up $21-million from the
fourth quarter of 2013, mainly due to higher spend on strategic
initiatives.
Review of wealth management fourth-quarter results
Net income for the quarter was $119-million, up $16-million from the
fourth quarter of 2013.
Revenue of $584-million was up $114-million from the fourth quarter of
2013, primarily due to the acquisition of Atlantic Trust on Dec. 31, 2013, higher average client assets under management driven by
market appreciation and higher net sales of long-term mutual funds, and
higher fee-based revenue in retail brokerage.
Non-interest expenses of $428-million were up $93-million from the
fourth quarter of 2013, primarily due to the impact of the acquisition
noted above and higher performance-based compensation.
Review of wholesale banking fourth-quarter results
Net income for the quarter was $136-million, compared with net income of
$282-million for the third quarter of 2014. Adjusted net income for the quarter was $216-million, compared with $254-million for the
prior quarter.
Revenue of $468-million was down $202-million from the third quarter,
primarily due to lower capital markets revenue, including a $112-million ($82-million after tax) charge relating to the incorporation of
FVA into the valuation of the bank's uncollateralized derivatives -- identified
as an item of note -- and lower revenue from corporate and investment
banking.
Provision for credit losses of $14-million compared with a provision for
credit losses of $6-million in the third quarter, mainly due to losses
in the bank's U.S. real estate finance portfolio.
Non-interest expenses of $293-million were up $14-million from the third
quarter, primarily due to higher performance-based compensation.
Income tax expense of $25-million was down $78-million from the third
quarter, due to lower income and a decrease in the relative proportion
of income earned in higher tax jurisdictions.
Review of corporate and other fourth-quarter results
Net loss was down $54-million from the fourth quarter of 2013 as a
result of higher revenue and a lower provision for credit losses.
Revenue was up $12-million from the fourth quarter of 2013.
Provision for credit losses was down $47-million from the fourth quarter
of 2013 primarily due to lower losses in CIBC FirstCaribbean.
Non-interest expenses were up $21-million from the fourth quarter of
2013, mainly due to higher unallocated support costs.
Income tax benefit was up $16-million from the fourth quarter of 2013
mainly due to an increase in the relative proportion of income earned
in lower tax jurisdictions and a higher TEB adjustment.
CONSOLIDATED STATEMENT OF INCOME
(in millions of dollars, except per share amounts)
For the 12
For the three months ended months ended
Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
2014 2014 2013 2014 2013
Interest income
Loans $ 2,410 $ 2,389 $ 2,453 $ 9,504 $ 9,795
Securities 403 397 407 1,628 1,631
Securities borrowed or purchased under resale agreements 82 82 91 320 347
Deposits with banks 4 5 8 25 38
-------- -------- -------- -------- --------
2,899 2,873 2,959 11,477 11,811
Interest expense
Deposits 842 821 903 3,337 3,679
Securities sold short 86 81 84 327 334
Securities lent or sold under repurchase agreements 35 36 25 127 102
Subordinated indebtedness 45 44 45 178 193
Other 10 16 9 49 50
-------- -------- -------- -------- --------
1,018 998 1,066 4,018 4,358
-------- -------- -------- -------- --------
Net interest income 1,881 1,875 1,893 7,459 7,453
Non-interest income
Underwriting and advisory fees 128 150 88 444 389
Deposit and payment fees 210 221 215 848 824
Credit fees 123 124 117 478 462
Card fees 106 108 133 414 535
Investment management and custodial fees 186 181 126 677 474
Mutual fund fees 337 317 267 1,236 1,014
Insurance fees, net of claims 92 85 93 369 358
Commissions on securities transactions 98 99 98 408 412
Trading income (loss) (123) (42) (9) (176) 27
AFS securities gains, net 44 24 9 201 212
FVO gains (losses), net (1) 2 6 (15) 5
Foreign exchange other than trading - 10 5 43 44
Income from equity-accounted associates and joint ventures 35 98 45 226 140
Other 101 106 94 764 369
-------- -------- -------- -------- --------
1,336 1,483 1,287 5,917 5,265
-------- -------- -------- -------- --------
Total revenue 3,217 3,358 3,180 13,376 12,718
Provision for credit losses 194 195 271 937 1,121
Non-interest expenses
Employee compensation and benefits 1,167 1,176 1,070 4,636 4,324
Occupancy costs 180 187 181 736 700
Computer, software and office equipment 319 304 285 1,200 1,052
Communications 80 78 75 312 307
Advertising and business development 78 70 79 285 236
Professional fees 61 43 59 201 179
Business and capital taxes 15 17 16 59 62
Other 187 172 165 1,096 761
-------- -------- -------- -------- --------
2,087 2,047 1,930 8,525 7,621
-------- -------- -------- -------- --------
Income before income taxes 936 1,116 979 3,914 3,976
Income taxes 125 195 154 699 626
-------- -------- -------- -------- --------
Net income $ 811 $ 921 $ 825 $ 3,215 $ 3,350
======== ======== ======== ======== ========
Net income (loss) attributable to non-controlling interests 2 3 (7) (3) (2)
Preferred shareholders 18 19 24 87 99
Common shareholders 791 899 808 3,131 3,253
-------- -------- -------- -------- --------
Net income attributable to equity shareholders 809 918 832 3,218 3,352
Earnings per share
Basic $ 1.99 $ 2.26 $ 2.02 $ 7.87 $ 8.11
Diluted 1.98 2.26 2.02 7.86 8.11
Dividends per common share 1.00 1.00 0.96 3.94 3.80
We seek Safe Harbor.
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