Canadian Imperial Bank of Commerce or CIBC (CM,CM.TO) Thursday reported higher profit in the second quarter, despite a decline in revenue, helped by lower provision for credit losses and income tax expense from the prior year.
Second-quarter net income applicable to common shares was C$636 million, compared with C$617 million for the same period last year. Earnings per share rose to C$1.60 from C$1.59 a year ago.
Cash net income applicable to common shares was C$643 million or C$1.62 per share, up from C$624 million or C$1.61 per share a year earlier.
The results for the 2011 second quarter were affected by C$50 million after tax, or C$0.13 per share, loss from the structured credit run-off business.
The bank's second-quarter revenue totaled C$2.89 billion, lower than the C$2.92 billion recorded in the same quarter of 2010. Total revenue after TEB (Tax Equivalent Basis) adjustment remained flat with C$2.93 billion recorded a year ago.
On average, six analysts polled by Thomson Reuters expected revenue of C$3.03 billion in the quarter.
Net interest income rose to C$1.53 billion from C$1.51 billion in the previous year, largely due to solid volume growth across most retail products, including the impact of the acquisition of the MasterCard portfolio completed on September 1, 2010.
Non-interest income was C$1.36 billion, down from last year's C$1.42 billion, reflecting the loss from structured credit run-off business compared with gains in the same quarter last year.
Volume growth and the acquisition of the MasterCard portfolio led to a 5 percent rise in retail markets revenue to C$2.45 billion. However, these revenue increases were offset in part by lower revenue from FirstCaribbean International Bank and narrower spreads.
Wholesale banking revenue reached C$393 million in the quarter, a significant decline from last year's C$548 million.
Provision for credit losses reduced to C$194 million from C$316 million a year ago. This reduction reflected lower write-offs and bankruptcies in the cards and personal lending portfolios and lower provisions in commercial banking, partially offset by expected losses arising from the MasterCard portfolio.
Income tax expense was down 15 percent, primarily due to higher tax-exempt income and a lower statutory tax rate.
As of April 30, 2011, total assets rose 9 percent from October 31, 2010 to C$384.11 billion. While loans increased 2 percent, deposits were up 13 percent.
Separately, CIBC said its board has declared a dividend of 87 cents per common share for the quarter ending July 31, payable on July 28 to shareholders of record at the close of business on June 28.
Going forward, CIBC said that both the Canadian and U.S. economies are expected to continue on a moderate recovery path in 2011.
Retail markets are expected to face slower growth in demand for mortgages and household credit, and modest improvements in demand for business credit.
Meanwhile, wholesale banking would benefit from a healthier pace of issuance of equities and bonds. Merger and acquisition activity is expected to increase as confidence improves.
CM closed Wednesday's trading at $86.15 while CM.TO ended at C$84.45.
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