CIBC reports $1.73 billion Q1 profit as concerns about mortgages, U.S. offices ease

CIBC's $1.73B Q1 profit

CIBC says it has sorted through the issues in its U.S. office portfolio and that its Canadian mortgage book is performing well as it reported profits that beat analyst expectations.

The bank has seen increased scrutiny over concerns about its exposure to the U.S office space, and the higher proportion of its business dedicated to Canada's housing market compared with its peers.

"We continue to successfully navigate through a fluid economic backdrop and execute on our client-centric strategy," said chief executive Victor Dodig on the bank's earnings call Thursday.

CIBC reported a first-quarter profit of $1.73 billion as its revenue rose five per cent compared with a year earlier.

The results came as provisions for credit losses amounted to $585 million, up from $295 million in the same quarter last year.

Provisions rose in part as the ratio of impaired loans in its U.S. office portfolio rose to 19.7 per cent, up from 1.8 per cent a year earlier. 

The office market has been under strain as a shift toward more remote and hybrid work has hit demand for office space, while high interest rates have pressured commercial borrowers.

Impaired loans are up substantially even as the bank has worked to reduce its exposure to the market. Loan balances to U.S. offices are down 12.5 per cent from a year ago to US$3.5 billion.

Dodig said the bank has now worked through the main issues with the portfolio.

"The team ... has done a very good job in rectifying a problem with U.S. real estate that none of us were pleased with," he said.

Dodig said the bank was disappointed with the performance of the loans, but that no one expected a global pandemic and the issues in the U.S. office portfolio are now behind them.

"We worked through it. And that issue, as we've outlined, is really in the rearview mirror as we work through the rest of the year."

He said the bank is also very comfortable with its Canadian mortgages as borrowers have deposits that remain higher than pre-pandemic levels and unemployment remains low.

"They're employed, they're working through things. That doesn't mean they're not anxious. But from a bank standpoint, the loan-to-value across the board is on average 50 per cent ... so that doesn't remain a concern."

Revenue for the quarter totalled $6.22 billion, up from $5.93 billion a year earlier.

On an adjusted basis, CIBC says it earned $1.81 per diluted share, down from an adjusted profit of $1.94 per diluted share a year earlier.

Analysts, on average, had expected a profit of $1.66 per share, according to estimates compiled by financial markets data firm Refinitiv.

CIBC said its Canadian personal and business banking business earned $650 million in the quarter, up from $590 million a year earlier, helped by higher revenue driven by higher net interest margins and volume growth and lower expenses, partially offset by an increased provision for credit losses.

Meanwhile, the bank's Canadian commercial banking and wealth management business earned $498 million, up from $469 million a year earlier.

CIBC's U.S. commercial banking and wealth management business lost $9 million compared with a profit of $201 million a year earlier as it faced higher expenses including a $91-million charge related to the special assessment imposed by the U.S. Federal Deposit Insurance Corp.

The bank's capital markets and direct financial services group earned $612 million, the same as a year earlier.

CIBC's "corporate and other" group saw a loss of $23 million for the quarter compared with a loss of $1.44 billion in its first quarter last year.

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