CIBC Sees 14% Decline In Net Income For Q3 2023, Nearly $500 Million Increase In Credit Loss Provisions

Canadian Imperial Bank of Commerce (TSX: CM) reported its financials for Q3 2023, highlighted by $5.85 billion in quarterly revenue. This is an increase from both Q2 2023’s $5.70 billion and Q3 2022’s $5.57 billion, and the topline figure beat the street estimate of $5.81 billion.

However, net income saw a decline, ending at $1.43 billion from last quarter’s $1.69 billion and last year’s $1.67 billion. This translates to $1.47 earnings per share.

On an adjusted basis, net income ended at $1.47 billion or $1.52 earnings per diluted share, failing to beat the expected $1.68 per share estimate.

“We delivered solid financial results in the third quarter despite a more challenging economic environment,” said CEO Victor G. Dodig.

The biggest share of income decline came from the U.S. Commercial Banking and Wealth Management division, reporting $73 million for the third quarter, down $120 million from a year ago mainly due to provisions for credit losses. On adjusted pre-provision, pre-tax earnings, the figure was $334 million, up $47 million from last year.

In the third quarter, Canadian Personal and Business Banking recorded a net income of $497 million, marking a decrease of $98 million or 16% compared to the same period last year. Similarly, Canadian Commercial Banking and Wealth Management posted a net income of $467 million for the third quarter, representing a decrease of $17 million or 4% from the corresponding quarter in the previous year. Conversely, Capital Markets experienced a net income of $494 million in the third quarter, reflecting an increase of $47 million or 11% from the same quarter a year earlier.

The overall provision for credit losses was $736 million, up $493 million from the same quarter last year. The increase in provision for credit losses on performing loans stemmed mainly from a less favorable shift in our economic projections. Furthermore, the rise in provision for credit losses on impaired loans resulted from elevated impairments across all strategic business units.

Back in June, CIBC was been working on addressing a series of regulatory breaches in its mortgage portfolio over the past year, as per orders from Canada’s banking regulator, the Office of the Superintendent of Financial Institutions.

The breaches were reportedly discovered during a routine audit involving thousands of CIBC’s clients who had exceeded acceptable debt obligations due to lines of credit secured against their homes. These problems were not linked to fraudulent activity, but rather a lack of follow-up from the bank to ensure customers closed other credit lines, resulting in an excess of total credit available.

CIBC last traded at $55.32 on the TSX, falling more than 10% since a year ago.

Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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