Sunday, December 21st4.6°C
24563
23791

CIBC plans to stay in Caribbean despite second-quarter hit on weak economy

TORONTO - Trouble in CIBC's Caribbean banking subsidiary left a mark on the bank's second-quarter results, but executives say despite the challenges they're not planning to exit the region.

"The business has historically been a good investment for us," chief operating officer Richard Nesbitt told analysts during a conference call, adding that he believes the division can return to past profitability levels.

". . . We continue to believe we can get there. Unfortunately, it's going to take us longer because the economic environment has not started to improve like we felt it would," Nesbitt said.

CIBC isn't the only Canadian bank to have suffered the effects of the weak Caribbean economy, but it has been hit the hardest in the quarter.

On Thursday, CIBC (TSX:CM) reported that its second-quarter profit dropped to $306 million, or 73 cents per share, due to losses from its CIBC First Caribbean subsidiary. That compared with a profit of $862 million or $2.09 per share in the same quarter last year.

The bank also boosted its quarterly dividend by two cents to $1 per common share.

Earlier this month, CIBC announced it would take a $420-million, non-cash goodwill impairment charge in the quarter related to the Caribbean, and another $123 million of after-tax of loan losses.

The Caribbean economy has been in a slump for several years, affected by the global financial crisis, which caused a slowdown in tourist visits to regions like the Cayman Islands, Barbados and the Bahamas.

Several Canadian banks have operated in the region, including Royal Bank (TSX:RY), which announced earlier this year it would sell its Jamaican banking operations. Scotiabank (TSX:BNS) also set aside more money for bad loans in the Caribbean in its second-quarter report.

CIBC has the biggest presence of the group, and calls itself the largest, regionally-listed bank in the Caribbean, with operations in 17 regional markets.

Despite the weakness in CIBC results, it was the sixth big bank to beat analysts' expectations on adjusted earnings per share in the quarter.

Along with CIBC, BMO (TSX:BMO) and National Bank (TSX:NB) also announced in the quarter that they're raising their dividends.

During the quarter, CIBC recorded $22 million in expenses related to its travel rewards program and from its Aeroplan transactions with Aimia (TSX:AIM) and TD Bank (TSX:TD). Travel rewards company Aimia Inc., which owns and operates the Aeroplan rewards program in Canada, now has TD Bank as its main partner as the issuer of Aeroplan credit cards.

Excluding such items, CIBC's adjusted net income was $887 million, or $2.17 cents per share, up three per cent year over year and ahead of analysts' expectations of $2.07 per share.

CIBC's wealth management business reported net income of $117 million for the second quarter, up $26 million or 29 per cent from the same period a year ago.

But its retail and business banking segment reported net income of $546 million for the second quarter, down $26 million or five per cent year over year.

CIBC said its provision for credit losses in quarter were $330 million compared with $265 million in the same quarter last year.

The bank's return on equity was seven per cent compared with 23 per cent in the same quarter last year.

Barclays analyst John Aiken said it was a solid quarter for CIBC, noting he had not been calling for an increase to the dividend.

"The beat against consensus and the dividend increase are positives. However, with CM (CIBC) performing reasonably strongly since reporting season began, the reported earnings may not be enough to sustain all of the relative outperformance," Aiken wrote in a research note.

"That said, we do not have any fundamental issues with the quarter and we would not necessarily anticipate a rush to the exit either."

Shares of CIBC closed down $1.36 at $97.68 on the Toronto Stock Exchange on Thursday.

The Canadian Press


Read more Business News

23041


Recent Trending




Today's Market
S&P TSX14468.26+121.51
S&P CDNX676.54+11.04
DJIA17804.8026.65
Nasdaq4765.38+16.983
S&P 5002070.65+9.42
CDN Dollar0.8618+0.0001
Gold1197.20+2.50
Oil56.50+2.39
Lumber336.20-0.70
Natural Gas3.446-0.196

 
Okanagan Companies
Pacific Safety0.12-0.01
Knighthawk0.01-0.005
QHR Technologies Inc1.25-0.03
Cantex0.03-0.005
Anavex Life Sciences0.1726+0.0026
Metalex Ventures0.05-0.005
Russel Metals25.58-0.42
Copper Mountain Mining1.55-0.02
Colorado Resources0.120.00
ReliaBrand Inc0.011-0.0089
Sunrise Resources Ltd0.05-0.005
Mission Ready Services0.215-0.01

 
23744


20759

FEATURED Property
21268571982 Hidden Ridge Place
5 bedrooms 4 baths
$839,900
more details
image2image2image2
Click here to feature your property
Please wait... loading


My final thoughts on real estate

This will be the last column I write on real estate. Largely because at the end of the year I will be handing in my license. After 20+ years of working in land development, resort development and rea...


Reflecting on the end of the year

The importance of the end of the year and the Christmas holidays is profound. It is a time to reconnect with family and traditions that have made us who we are. But the year-end has always been a time...


Parenthood: Estates, insurance & taxes

It is now even more important to ensure your loved ones are well looked if anything should happen to you. Here are a few topics to consider helping you prepare for some of the unexpected events that c...

_



24111

24437


Member of BC Press Council


24604