Canadian Imperial Bank of Commerce (CM,CM.TO) on Wednesday reported a sharp decline in third-quarter profit, hurt by a loss on structured credit run-off activities. The company expects that economic growth in Canada will continue to be sluggish in the fourth quarter.
For the third quarter, the bank's net income was C$71 million, or C$0.11 per share, down from C$835 million, or C$2.31 per share, in the same quarter last year.
Results for the third quarter of 2008 were primarily affected by a C$596 million, or C$1.56 per share, loss on structured credit run-off activities.
Total revenue fell to C$1.91 billion from C$2.98 billion in the prior-year quarter.
Net interest income was up 12% over last year to C$1.33 billion, mainly due to decreased trading interest expense, volume growth in retail products, interest income on tax reassessments, and higher interest income in FirstCaribbean. These factors were offset in part by interest expense related to leveraged leases.
Non-interest income declined 68% from the prior-year quarter to C$578 million.
Commenting on the results, Gerald McCaughey, president and chief executive officer of CIBC, said, "Our results this quarter were affected by the volatile, and generally difficult, environment that persisted over much of the third quarter, as well as by the impact of our ongoing run-off activities and the refocusing of our core businesses, particularly in CIBC World Markets."
The continued deterioration in securities with exposure to the U.S. residential mortgage market and financial guarantor credit spreads required the bank to record further asset write-downs and counterparty credit valuation adjustments in its structured credit run-off business. In addition, the market conditions had a negative impact on the bank's performance in other areas, particularly within its wholesale and retail brokerage operations.
Retail markets reported net income of C$572 million for the quarter, down 4% from last year, primarily due to lower treasury revenue allocations and higher loan losses, which more than offset better expense performance. Retail markets' revenue dropped 1% to C$2.36 billion.
World markets reported a net loss of C$538 million for the third quarter. Revenues were negative C$598 million compared with revenues of C$455 million in the previous year.
Among competitors, Bank of Nova Scotia (BNS,BNS.TO) has reported a decline in its third-quarter profit, as the company recorded a 73% higher provision for credit losses, despite a 5% increase in revenues.
Another peer, Toronto-Dominion Bank (TD,TD.TO) also reported lower profit for the recently closed second quarter, with revenues declining year-over-year.
Canadian Imperial Bank's net loss for the nine-month period was C$2.496 billion, in comparison with a net income of C$2.41 billion for the same period in 2007. Total revenues plunged to C$1.51 billion from C$9.12 billion a year ago.
Going forward, the bank expects that Canadian economic growth will remain very sluggish in the fourth quarter, held back by weak exports and the impacts of recent employment declines on consumer spending. Housing construction is also showing some tentative signs of a slowdown. However, interest rates are likely to remain generally stable until 2009 as the central bank awaits signs of an economic pick-up in the U.S.
The bank also anticipates that its retail markets business will be benefited from historically low unemployment rates that support lending growth and household credit quality. A slower pace of real estate price increases and home sales are projected to moderate mortgage growth rates.
For world markets, mergers and acquisition and equity activity are likely to remain slower than in the prior year due to credit concerns affecting global leveraged deals. The company also anticipates loan demand to increase due to reduced investor appetite for asset-backed securities. Further, the economic softness could lead to a less favorable period for corporate credit risk in certain parts of the Canadian economy, the bank noted.
The bank expects that the sale of certain U.S. capital markets related activities located in the U.K. and Asia to Oppenheimer will close in the fourth quarter of 2008.
The bank also said that its target for 2008 is to hold expenses flat relative to annualized 2006 fourth quarter expenses, excluding expenses related to FirstCaribbean and its restructuring activities.
CM is trading at US$57.55 on the NYSE, up US$2.96, on a volume of 237,563 shares.
On the Toronto stock exchange, CM.TO is up by C$3.31 at C$60.37, on a volume of 1.32 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.