CIBC: Growth slows while expenses remain high

We project EPS declining 1% for 2019, no change to our FVE

Eric Compton 22 August, 2019 | 1:51PM

Narrow-moat Canadian Imperial Bank of Commerce (CM) reported OK fiscal third-quarter results. Top-line growth wasn’t stellar, with adjusted revenue up 4% and expenses up close to 5%, leading to minimal EPS growth. The bank continues to emphasize that it is investing in the franchise, modernizing infrastructure, building out distribution channels, and hiring personnel in business areas it would like to grow, such as Canadian commercial banking.

Credit costs were relatively stable, a key area to watch for CIBC, as provisioning remained within $200 million to $300 million. Projections for lower natural gas prices played a role in causing higher provisioning in the oil and gas book, while management also noted some weakness in the Canadian agriculture portfolio. The Canadian residential mortgage book remained strong, though, as key credit metrics remained stable. We don't see any real warning signs for the bank at this point. Diluted earnings per share are now down 1.5% year to date, and the bank needs adjusted EPS of $3.14 in the fourth quarter to come in flat for the year, which would be the second-strongest quarter the bank has had in at least two years. As such, we now project EPS declining 1% for 2019. The adjusted return on equity came in at 15.6% as this metric continues to drop. Management admitted that interest-rate cuts will be another headwind to revenue growth, although underlying balance sheet growth should help offset this.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canadian Imperial Bank of Commerce78.08 CAD-4.78

About Author

Eric Compton

Eric Compton  Eric Compton is an equity analyst for Morningstar,