Canadian Imperial (CM) Up on Higher Q4 Earnings, Revenues

Canadian Imperial Bank of Commerce CM increased nearly 4% on the NYSE following the release of its fourth-quarter and fiscal 2016 earnings (ended Oct 31) last week. Adjusted earnings per share for the quarter came in at C$2.60, up from C$2.36 in the prior-year quarter.

For fiscal 2016, adjusted earnings increased 8% year over year to C$10.22 per share.

Quarterly results improved based on growth in top line. Further, a strong balance sheet position supported the results. However, an increase in provision for credit losses and expenses was an undermining factor.

After considering several non-recurring items, reported net income in the quarter surged 20% year over year to C$931 million ($710 million). For fiscal 2016, net income was C$4.3 billion, up 19% from the prior year.

Improvement in Revenues Offset a Marginal Rise in Costs

Adjusted total revenue grew 6% year over year to C$3.8 billion ($2.9 billion). On a reported basis, total revenue was C$3.7 billion ($2.8 billion), up 6% from the prior-year quarter.

For fiscal 2016, adjusted revenue was C$15 billion, an increase of 5% from the prior year. On a reported basis, total revenue rose 9% year over year to C$15 billion.  

Net interest income was C$2.1 billion ($1.6 billion), up 3% from the year-ago quarter. The improvement reflected a rise in interest income, partly offset by higher interest expenses.

Non-interest income grew 9% year over year to C$1.6 billion ($1.2 billion). The upside was due to growth in all fee income components, except deposit and payment fees, net insurance fees, commissions on securities transactions, AFS securities gains and income from equity-accounted associates and joint ventures.

Adjusted non-interest expenses totaled C$2.2 billion ($1.7 billion), up 2% from the year-ago quarter.

Total provision for credit losses jumped 12% year over year to C$222 million ($169.3 million).

Stable Balance Sheet; Capital Ratios Reflect Strength

Total assets came in at C$501.4 billion ($374 billion) as of Oct 31, 2016, up 1% from the prior quarter. Loans and acceptances (net of allowance) increased 10% sequentially to C$319.8 billion ($238.6 billion), while deposits grew 8% to C$395.6 billion ($295.1 billion).

Adjusted return on common shareholders’ equity was 18.8% at the end of the quarter, up from 18.5% in the year-ago quarter.

As of Oct 31, 2016, Basel III Common Equity Tier 1 ratio came in at 11.3% compared with 10.8% as of Oct 31, 2015. Further, Tier 1 capital ratio was 12.8% compared with 12.5% as of Oct 31, 2015. Total capital ratio was 14.8%, down from 15.0% in the prior-year quarter.

Our Viewpoint

Canadian Imperial delivered a decent performance at a time when banks in Canada are encountering a number of challenges, including a low rate environment, stressed energy sector and a weak economy. However, slow growth in interest income and limited avenues for earning fee income keep us apprehensive regarding the company’s near-term performance. Also, rising provision for credit losses is a major headwind.

Notably, Canadian Imperial’s deal to acquire PrivateBancorp, Inc. PVTB is likely to expand its private banking and wealth management capabilities in the U.S.

CDN IMPL BK Price, Consensus and EPS Surprise

 

CDN IMPL BK Price, Consensus and EPS Surprise | CDN IMPL BK Quote

Canadian Imperial currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Canadian Banks

The Bank of Nova Scotia’s BNS net income for the quarter came in at C$2.0 billion ($1.5 billion), up 9.1% year over year. A rise in revenues was partly offset by higher operating expenses. Improvement in capital and profitability ratios was impressive.

Royal Bank of Canada’s RY net income of C$2.5 billion ($1.9 billion) was down nearly 2% from the prior-year quarter. Rise in expenses and higher provisions led to investors’ apprehension. However, growth in net interest income, steady growth in loan and deposits, and a strong capital position acted as tailwinds.

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CDN IMPL BK (CM): Free Stock Analysis Report
 
BANK OF NOVA SC (BNS): Free Stock Analysis Report
 
PRIVATEBANCORP (PVTB): Free Stock Analysis Report
 
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