TORONTO, Aug. 29, 2024 /CNW/ - CIBC (TSX:CM) (NYSE:CM) today announced its financial results for the third quarter ended July 31, 2024.
Third quarter highlights
Q3/24
Q3/23 (1)
Q2/24
YoY
Variance
QoQ Variance
Revenue
$6,604 million
$5,852 million
$6,164 million
+13 %
+7 %
Reported Net Income
$1,795 million
$1,432 million
$1,749 million
+25 %
+3 %
Adjusted Net Income (2)
$1,895 million
$1,475 million
$1,718 million
+28 %
+10 %
Adjusted pre-provision, pre-tax earnings (2)
$2,939 million
$2,602 million
$2,690 million
+13 %
+9 %
Reported Diluted Earnings Per Share (EPS)
$1.82
$1.47
$1.79
+24 %
+2 %
Adjusted Diluted EPS (2)
$1.93
$1.52
$1.75
+27 %
+10 %
Reported Return on Common Shareholders' Equity (ROE) (3)
13.2 %
11.6 %
13.7 %
Adjusted ROE (2)
14.0 %
12.0 %
13.4 %
Net interest margin on average interest-earnings assets (3)(4)
1.50 %
1.49 %
1.46 %
Net interest margin on average interest-earnings assets (excluding trading) (3)(4)
1.84 %
1.67 %
1.72 %
Common Equity Tier 1 (CET1) Ratio (5)
13.3 %
12.2 %
13.1 %
"Our strong third quarter results reflect the consistent, disciplined execution of our client-focused strategy and the diversification of our North American platform as we continue to create value for our stakeholders," said Victor G. Dodig, CIBC President and Chief Executive Officer. "We're deepening client relationships, and have both a highly connected team and a strong balance sheet, all of which are contributing to CIBC's continued momentum."
Results for the third quarter of 2024 were affected by the following items of note aggregating to a negative impact of $0.11 per share:
$88 million charge to income tax related to the enactment of a Federal tax measure that denies the dividends received deduction for banks(6) ($123 million tax equivalent basis (TEB) revenue reversal and tax recovery in Capital Markets and Direct Financial Services with offsets in Corporate and Other; $88 million tax charge in Capital Markets and Direct Financial Services);
$15 million ($11 million after-tax) amortization of acquisition-related intangible assets; and
$2 million ($1 million after-tax) charge related to the special assessment imposed by the Federal Deposit Insurance Corporation (FDIC) on U.S. depository institutions, which impacted CIBC Bank USA (U.S. Commercial Banking and Wealth Management).
Our CET1 ratio(5) was 13.3% at July 31, 2024, compared with 13.1% at the end of the prior quarter. CIBC's leverage ratio(5) and liquidity coverage ratio(5) at July 31, 2024 were 4.3% and 126%, respectively.
Core business performance
Canadian Personal and Business Banking reported net income of $628 million for the third quarter, up $129 million or 26% from the third quarter a year ago, primarily due to higher revenue and a lower provision for credit losses, partially offset by higher expenses. The higher revenue was mainly driven by higher net interest margin, volume growth and higher fees. Adjusted pre-provision, pre-tax earnings(2) were $1,217 million, up $65 million from the third quarter a year ago, as higher revenue was partially offset by higher adjusted(2) non-interest expenses mainly due to a software impairment charge, higher employee-related and performance-based compensation, and higher spending on strategic initiatives.
Canadian Commercial Banking and Wealth Management reported net income of $468 million for the third quarter, up $1 million from the third quarter a year ago, primarily due to higher revenue, partially offset by higher expenses. The increase in revenue was due to higher fee-based revenue from market appreciation, higher commission revenue from increased client activity, and higher net interest income in wealth management. Commercial banking revenue was lower compared to the prior year due to lower deposit margins, partially offset by volume growth. Expenses increased primarily due to higher performance-based compensation and higher spending on strategic initiatives. Adjusted pre-provision, pre-tax earnings(2) were $687 million, up $11 million from the third quarter a year ago, due to higher wealth management revenue, partially offset by lower commercial banking revenue.
(1)
Certain comparative amounts have been restated to reflect the adoption of IFRS 17 in the first quarter of 2024. For additional information, see Note 1 to the interim consolidated financial statements of our Report to Shareholders for the third quarter of 2024 available on SEDAR+ at www.sedarplus.com.
(2)
This measure is a non-GAAP measure. For additional information, see the "Non-GAAP measures" section, including the quantitative reconciliations of reported GAAP measures to: adjusted non-interest expenses and adjusted net income on pages 3 to 7; and adjusted pre-provision, pre-tax earnings on page 8.
(3)
Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found in the "Glossary" section of our Report to Shareholders for the third quarter of 2024 available on SEDAR+ at www.sedarplus.com.
(4)
Average balances are calculated as a weighted average of daily closing balances.
(5)
Our capital ratios are calculated pursuant to the Office of the Superintendent of Financial Institution's (OSFI's) Capital Adequacy Requirements (CAR) Guideline and the leverage ratio is calculated pursuant to OSFI's Leverage Requirements Guideline, all of which are based on the Basel Committee on Banking Supervision (BCBS) standards. The Basel III reforms related to market risk and credit valuation adjustments were implemented as of November 1, 2023. For additional information, see the "Capital management" and "Liquidity risk" sections of our Report to Shareholders for the third quarter of 2024 available on SEDAR+ at www.sedarplus.com.
(6)
This item of note reports the impact to the consolidated income tax expense in the third quarter of 2024 from the enactment on June 20, 2024 of Bill C-59 that denies the dividends received deduction for dividends received by banks on and after January 1, 2024. The corresponding impact on TEB in Capital Markets and Direct Financial Services and Corporate and Other is also included in this item of note with no impact on the consolidated item of note. This item of note is equal and offsetting to the sum of the related items of note in the first and second quarters of 2024.
U.S. Commercial Banking and Wealth Management reported net income of $215 million (US$158 million) for the third quarter, up $142 million (US$103 million or 187%) from the third quarter a year ago, primarily due to a lower provision for credit losses and higher revenue, partially offset by higher expenses. Adjusted pre-provision, pre-tax earnings(1) were $320 million (US$234 million), down $14 million (US$17 million) from the third quarter a year ago, as higher revenue was more than offset by higher expenses. Higher revenue was primarily due to higher fees from loan syndications as well as market appreciation, partially offset by lower deposit margins. Non-interest expenses increased mainly due to higher spending on strategic and infrastructure initiatives, including higher performance-based and employee-related compensation.
Capital Markets and Direct Financial Services reported net income of $388 million for the third quarter, down $106 million or 21% from the third quarter a year ago, primarily due to higher non-interest expenses, a higher provision for credit losses and lower revenue from our global markets business, partially offset by higher revenue from our direct financial services and corporate and investment banking businesses. Expenses were up due to higher legal provisions, higher performance-based and employee-related compensation, and higher spending on strategic initiatives. Adjusted pre-provision, pre-tax earnings(1) were up $19 million or 3% from the third quarter a year ago due to higher revenue, largely offset by higher expenses.
Credit quality
Provision for credit losses was $483 million, down $253 million from the same quarter last year. Provision for credit losses on performing loans was down as the same quarter last year included an unfavourable change in our economic outlook. Provision for credit losses on impaired loans was down mainly due to lower provisions in U.S. Commercial Banking and Wealth Management, partially offset by higher provisions in Canadian Personal and Business Banking, and Capital Markets and Direct Financial Services.
(1)
This measure is a non-GAAP measure. For additional information and a reconciliation of reported results to adjusted results, where applicable, see the "Non-GAAP measures" section.
Non-GAAP measures
We use a number of financial measures to assess the performance of our business lines as described below. Some measures are calculated in accordance with GAAP (International Financial Reporting Standards), while other measures do not have a standardized meaning under GAAP, and accordingly, these measures may not be comparable to similar measures used by other companies. Investors may find these non-GAAP measures, which include non-GAAP financial measures and non-GAAP ratios as defined in National Instrument 52-112 "Non-GAAP and Other Financial Measures Disclosure", useful in understanding how management views underlying business performance.
Management assesses results on a reported and adjusted basis and considers both as useful measures of performance. Adjusted measures, which include adjusted total revenue, adjusted provision for credit losses, adjusted non-interest expenses, adjusted income before income taxes, adjusted income taxes, adjusted net income and adjusted pre-provision, pre-tax earnings, remove items of note reported results to calculate our adjusted results. Adjusted measures represent non-GAAP measures. Non-GAAP ratios include an adjusted measure as one or more of their components. Non-GAAP ratios include adjusted diluted EPS, adjusted efficiency ratio, adjusted operating leverage, adjusted dividend payout ratio, adjusted return on common shareholders' equity and adjusted effective tax rate.
Certain additional disclosures for these specified financial measures have been incorporated by reference and can be found in the "Non-GAAP measures" section of our Report to Shareholders for the third quarter of 2024 available on SEDAR+ at www.sedarplus.com.
The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results on a segmented basis.
U.S.
Canadian
U.S.
Capital
Commercial
Canadian
Commercial
Commercial
Markets
Banking
Personal
Banking
Banking
and Direct
and Wealth
and Business
and Wealth
and Wealth
Financial
Corporate
CIBC
Management
$ millions, for the three months ended July 31, 2024
Banking
Management
Management
Services
and Other
Total
(US$ millions)
Operating results – reported
Total revenue
$
2,598
$
1,449
$
726
$
1,348
$
483
$
6,604
$
530
Provision for credit losses
338
42
47
45
11
483
33
Non-interest expenses
1,388
762
416
770
346
3,682
304
Income before income taxes
872
645
263
533
126
2,439
193
Income taxes
244
177
48
145
30
644
35
Net income
628
468
215
388
96
1,795
158
Net income attributable to non-controlling interests
-
-
-
-
9
9
-
Net income attributable to equity shareholders
628
468
215
388
87
1,786
158
Diluted EPS ($)
$
1.82
Impact of items of note (1)
Revenue
Adjustments related to enactment of a Federal tax measure in June
2024 that denies the dividends received deduction for banks (2)
$
-
$
-
$
-
$
123
$
(123)
$
-
$
-
Impact of items of note on revenue
-
-
-
123
(123)
-
-
Non-interest expenses
Amortization of acquisition-related intangible assets
(7)
-
(8)
-
-
(15)
(6)
Charge related to the special assessment imposed by the FDIC
-
-
(2)
-
-
(2)
(2)
Impact of items of note on non-interest expenses
(7)
-
(10)
-
-
(17)
(8)
Total pre-tax impact of items of note on net income
7
-
10
123
(123)
17
8
Income taxes
Amortization of acquisition-related intangible assets
2
-
2
-
-
4
2
Adjustments related to enactment of a Federal tax measure in June
2024 that denies the dividends received deduction for banks (2)
-
-
-
35
(123)
(88)
-
Charge related to the special assessment imposed by the FDIC
-
-
1
-
-
1
1
Impact of items of note on income taxes
2
-
3
35
(123)
(83)
3
Total after-tax impact of items of note on net income
$
5
$
-
$
7
$
88
$
-
$
100
$
5
Impact of items of note on diluted EPS ($) (3)
$
0.11
Operating results – adjusted (4)
Total revenue – adjusted (5)
$
2,598
$
1,449
$
726
$
1,471
$
360
$
6,604
$
530
Provision for credit losses – adjusted
338
42
47
45
11
483
33
Non-interest expenses – adjusted
1,381
762
406
770
346
3,665
296
Income before income taxes – adjusted
879
645
273
656
3
2,456
201
Income taxes – adjusted
246
177
51
180
(93)
561
38
Net income – adjusted
633
468
222
476
96
1,895
163
Net income attributable to non-controlling interests – adjusted
-
-
-
-
9
9
-
Net income attributable to equity shareholders – adjusted
633
468
222
476
87
1,886
163
Adjusted diluted EPS ($)
$
1.93
(1)
Items of note are removed from reported results to calculate adjusted results.
(2)
This item of note reports the impact to the consolidated income tax expense in the third quarter of 2024 from the enactment on June 20, 2024 of Bill C-59 that denies the dividends received deduction for dividends received by banks on and after January 1, 2024. The corresponding impact on TEB in Capital Markets and Direct Financial Services and Corporate and Other is also included in this item of note with no impact on the consolidated item of note.
(3)
Includes the impact of rounding differences between diluted EPS and adjusted diluted EPS.
(4)
Adjusted to exclude the impact of items of note. Adjusted measures are non-GAAP measures.
(5)
CIBC total results excludes a reversal of a TEB adjustment of $123 million for the quarter ended July 31, 2024 (April 30, 2024: excludes a TEB adjustment of $71 million; July 31, 2023: excludes a TEB adjustment of $66 million) and excludes a TEB adjustment of $16 million for the nine months ended July 31, 2024 (July 31, 2023: excludes a TEB adjustment of $192 million).
(6)
Certain comparative amounts have been restated to reflect the adoption of IFRS 17 in the first quarter of 2024. For additional information, see Note 1 to the interim consolidated financial statements of our Report to Shareholders for the third quarter of 2024 available on SEDAR+ at www.sedarplus.com.
(7)
Relates to the net legal provisions recognized in the first and second quarters of 2023.
(8)
The income tax charge is comprised of $510 million for the present value of the estimated amount of the Canada Recovery Dividend (CRD) tax of $555 million, and a charge of $35 million related to the fiscal 2022 impact of the 1.5% increase in the tax rate applied to taxable income of certain bank and insurance entities in excess of $100 million for periods after April 2022. The discount of $45 million on the CRD tax accretes over the four-year payment period from initial recognition.
The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results on a segmented basis.
U.S.
Canadian
U.S.
Capital
Commercial
Canadian
Commercial
Commercial
Markets
Banking
Personal
Banking
Banking
and Direct
and Wealth
and Business
and Wealth
and Wealth
Financial
Corporate
CIBC
Management
$ millions, for the three months ended April 30, 2024
Banking
Management
Management
Services
and Other
Total
(US$ millions)
Operating results – reported
Total revenue
$
2,476
$
1,384
$
666
$
1,488
$
150
$
6,164
$
489
Provision for credit losses
270
37
186
16
5
514
136
Non-interest expenses
1,319
720
396
706
360
3,501
290
Income (loss) before income taxes
887
627
84
766
(215)
2,149
63
Income taxes
238
171
(9)
206
(206)
400
(6)
Net income (loss)
649
456
93
560
(9)
1,749
69
Net income attributable to non-controlling interests
-
-
-
-
10
10
-
Net income (loss) attributable to equity shareholders
649
456
93
560
(19)
1,739
69
Diluted EPS ($)
$
1.79
Impact of items of note (1)
Revenue
Recovery to income tax that will be eliminated with the substantive
enactment of a Federal proposal to deny the dividends received
deduction for banks (2)
$
-
$
-
$
-
$
(71)
$
71
$
-
$
-
Impact of items of note on revenue
-
-
-
(71)
71
-
-
Non-interest expenses
Amortization of acquisition-related intangible assets
(6)
-
(8)
-
-
(14)
(6)
Charge related to the special assessment imposed by the FDIC
-
-
(13)
-
-
(13)
(10)
Impact of items of note on non-interest expenses
(6)
-
(21)
-
-
(27)
(16)
Total pre-tax impact of items of note on net income
6
-
