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Bloomberg
Canadian Imperial Bank of Commerce (CIBC) is seeing an uptick in bad loans, providing validation to short-seller concerns that credit conditions are worsening.
Investors and analysts have been watching for signs of deteriorating loans since short sellers earlier this year said that CIBC and other banks are ill-prepared for worsening credit conditions. CIBC’s soured-loan provisions totaled C$291 million ($219 million) in the fiscal third quarter, compared with C$255 million in the previous three months and up 21% from a year earlier.
CIBC had an enviable record of defying expectations quarter after quarter, for almost four years, until missing estimates in the fourth quarter of 2018 — and subsequent periods since. CIBC broke that streak in the quarter ended July 31, beating analysts’ estimates.
CIBC once had enviable mortgage growth, trouncing other banks with 12% year-over-year gains through 2017 — until the pendulum started to swing other way at 2018-end. CIBC’s domestic mortgage book contracted for the third straight quarter with C$201 billion in balances, down 1% from a year ago.
Canadian banking is CIBC’s biggest division, with Toronto-based company being more reliant on domestic personal-and-commercial banking than its larger peers.
The division earned C$657 million in the quarter, up 2.8%, to account for 47% of overall earnings.
Canada’s fifth-biggest bank also announced that Chief Financial Officer Kevin Glass will step down Oct. 31, to be replaced by Hratch Panossian, currently executive vice president, global controller and investor relations.
Market Reaction
CIBC has been the worst-performing Canadian bank this year, with its shares falling 2.1% through Wednesday, lagging the 4.7% increase for the eight-company S&P/TSX Commercial Banks Index.