TORONTO, Aug. 27, 2020 /CNW/ – CIBC (TSX: CM) (NYSE: CM) today announced its financial results for the third quarter ended July 31, 2020.
CIBC Logo (CNW Group/CIBC)
Q3/20
Q3/19
Q2/20
YoY Variance
QoQ Variance
Reported Net Income
$1,172 million
$1,398 million
$392 million
-16%
+199%
Adjusted Net Income (1)
$1,243 million
$1,415 million
$441 million
-12%
+182%
Reported Diluted Earnings Per Share (EPS)
$2.55
$3.06
$0.83
-17%
+207%
Adjusted Diluted EPS (1)
$2.71
$3.10
$0.94
-13%
+188%
Reported Return on Common Shareholders’ Equity (ROE)
12.1%
15.5%
4.0%
Adjusted ROE (1)
12.9%
15.6%
4.5%
Common Equity Tier 1 Ratio
11.8%
11.4%
11.3%
Victor G. Dodig, CIBC President and Chief Executive Officer. “The continued execution of our strategy and ongoing investments in our business, as well as disciplined expense management, have contributed to our resilience and positioned us well for the evolving macroeconomic environment. Our entire team is engaged and committed to supporting our clients and communities.”
$0.16 per share:
$70 million ($51 million after-tax) increase in legal provisions; and
$26 million ($20 million after-tax) amortization of acquisition-related intangible assets.
July 31, 2020 compared with 11.3% at the end of the prior quarter. CIBC’s leverage ratio at July 31, 2020 was 4.6%.
$508 million for the third quarter, down $150 million or 23% from the third quarter a year ago. Excluding items of note, adjusted net income(1) was $510 million, down $150 million or 23% from the third quarter a year ago mainly due to lower revenue as implications from the COVID-19 pandemic continue to impact the business. Revenue was lower due to changes in the interest rate environment, lower client transaction activity, and interest rate relief provided to our credit card clients as part of the CIBC client relief programs offered to support our clients through the pandemic.
(1)
For additional information, see the “Non-GAAP measures” section. Pre-provision earnings is revenue net of non-interest expenses and is a non-GAAP measure.
(2)
Certain prior period information has been revised due to enhancements made to our transfer pricing methodology. See the “External reporting changes” section of our Report to Shareholders for the third quarter of 2020 for additional details.
Management assesses results on a reported and adjusted basis and considers both as useful measures of performance. Adjusted results remove items of note from reported results and are used to calculate our adjusted measures. Adjusted measures represent non-GAAP measures.
For a more detailed discussion on our non-GAAP measures, see page 13 of the 2019 Annual Report, as updated by the “Non-GAAP measures” section of our Report to Shareholders for the third quarter of 2020 to reflect the changes that we made in the first quarter of 2020 (see the “External reporting changes” section of our Report to Shareholders for the third quarter of 2020 for additional details regarding these changes).
The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results.
For the three
For the nine
months ended
months ended
2020
2020
2019
2020
2019
$ millions
Jul. 31
Apr. 30
Jul. 31
Jul. 31
Jul. 31
Operating results – reported
Total revenue
$
4,708
$
4,578
$
4,732
$
14,141
$
13,839
Provision for credit losses
525
1,412
291
2,198
884
Non-interest expenses
2,702
2,704
2,670
8,471
8,018
Income before income taxes
1,481
462
1,771
3,472
4,937
Income taxes
309
70
373
696
1,009
Net income
1,172
392
1,398
2,776
3,928
Net income (loss) attributable to non-controlling interests
2
(8)
6
1
17
Net income attributable to equity shareholders
1,170
400
1,392
2,775
3,911
Diluted EPS ($)
$
2.55
$
0.83
$
3.06
$
6.02
$
8.61
Impact of items of note (1)
Revenue
Purchase accounting adjustments (2)
$
–
$
–
$
(8)
$
–
$
(27)
Impact of items of note on revenue
–
–
(8)
–
(27)
Expenses
Amortization of acquisition-related intangible assets (3)
(26)
(57)
(27)
(110)
(81)
Transaction and integration-related costs as well as purchase accounting adjustments (4)
–
–
(2)
–
2
Restructuring charge (5)
–
–
–
(339)
–
Increase in legal provisions (6)
(70)
–
–
(70)
–
Charge for payment made to Air Canada (7)
–
–
–
–
(227)
Impact of items of note on expenses
(96)
(57)
(29)
(519)
(306)
Total pre-tax impact of items of note on net income
96
57
21
519
279
Transaction and integration-related costs and purchase accounting adjustments (2)(4)
–
–
(2)
–
(7)
Amortization of acquisition-related intangible assets (3)
6
8
6
20
19
Restructuring charge (5)
–
–
–
89
–
Increase in legal provisions (6)
19
–
–
19
–
Charge for payment made to Air Canada (7)
–
–
–
–
60
Impact of items of note on income taxes
25
8
4
128
72
Total after-tax impact of items of note on net income
71
49
17
391
207
Impact of items of note on diluted EPS ($)
$
0.16
$
0.11
$
0.04
$
0.88
$
0.46
Operating results – adjusted (8)
Total revenue (9)
$
4,708
$
4,578
$
4,724
$
14,141
$
13,812
Provision for credit losses
525
1,412
291
2,198
884
Non-interest expenses
2,606
2,647
2,641
7,952
7,712
Income before income taxes
1,577
519
1,792
3,991
5,216
Income taxes
334
78
377
824
1,081
Net income
1,243
441
1,415
3,167
4,135
Net income (loss) attributable to non-controlling interests
2
(8)
6
1
17
Net income attributable to equity shareholders
1,241
449
1,409
3,166
4,118
Adjusted diluted EPS ($)
$
2.71
$
0.94
$
3.10
$
6.90
$
9.07
(1)
Reflects the impact of items of note on our adjusted results as compared with our reported results.
(2)
Includes the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank, shown as an item of note from the fourth quarter of 2017 to the fourth quarter of 2019, recognized in U.S. Commercial Banking and Wealth Management.
(3)
Amortization of acquisition-related intangible assets is recognized in the SBU of the acquired business or Corporate and Other. A summary is provided in the table below.
Canadian Personal and Business Banking (pre-tax)
$
(2)
$
(2)
$
(2)
$
(6)
$
(6)
Canadian Personal and Business Banking (after-tax)
(2)
(1)
(2)
(5)
(5)
U.S. Commercial Banking and Wealth Management (pre-tax)
(21)
(23)
(22)
(66)
(66)
U.S. Commercial Banking and Wealth Management (after-tax)
(15)
(17)
(16)
(48)
(49)
Corporate and Other (pre-tax)
(3)
(32)
(3)
(38)
(9)
Corporate and Other (after-tax)
(3)
(31)
(3)
(37)
(8)
(4)
Transaction costs include legal and other advisory fees and interest adjustments relating to the obligation payable to dissenting shareholders. Integration costs are comprised of direct and incremental costs incurred as part of planning for and executing the integration of the businesses of The PrivateBank (subsequently rebranded as CIBC Bank USA) and Geneva Advisors with CIBC, including enabling cross-sell opportunities and expansion of services in the U.S. market, the upgrade and conversion of systems and processes, project management, integration-related travel, severance, consulting fees and marketing costs related to rebranding activities. Purchase accounting adjustments, shown as an item of note from the fourth quarter of 2017 to the fourth quarter of 2019, include changes in the fair value of contingent consideration relating to the Geneva Advisors and Wellington Financial acquisitions. These items are recognized in Corporate and Other.
(5)
Restructuring charge associated with ongoing efforts to transform our cost structure and simplify our bank. This charge consists primarily of employee severance and related costs and was recognized in Corporate and Other.
(6)
Recognized in Corporate and Other.
(7)
Charge for a payment made to Air Canada, including related sales tax and transaction costs, to secure our participation in its new loyalty program recognized in Canadian Personal and Business Banking.
(8)
Adjusted to exclude the impact of items of note.
(9)
Excludes TEB adjustments of $51 million (April 30, 2020: $46 million; July 31, 2019: $46 million) and $146 million for the nine months ended July 31, 2020 (July 31, 2019: $131 million). Our adjusted efficiency ratio is calculated on a TEB.
Canadian
U.S.
Canadian
Commercial
Commercial
Personal
Banking
Banking
and Business
and Wealth
and Wealth
Capital
Corporate
CIBC
$ millions, for the three months ended
Banking
Management
Management
Markets
and Other
Total
2020
Reported net income (loss)
$
508
$
320
$
62
$
392
$
(110)
$
1,172
Jul. 31
After-tax impact of items of note (1)
2
–
15
–
54
71
Adjusted net income (loss) (2)
$
510
$
320
$
77
$
392
$
(56)
$
1,243
2020
Reported net income (loss)
$
203
$
206
$
18
$
137
$
(172)
$
392
Apr. 30
After-tax impact of items of note (1)
1
–
17
–
31
49
Adjusted net income (loss) (2)
$
204
$
206
$
35
$
137
$
(141)
$
441
2019
Reported net income (loss)
$
658
$
344
$
173
$
235
$
(12)
$
1,398
Jul. 31 (3)
After-tax impact of items of note (1)
2
–
10
–
5
17
Adjusted net income (loss) (2)
$
660
$
344
$
183
$
235
$
(7)
$
1,415
$ millions, for the nine months ended
2020
Reported net income (loss)
$
1,328
$
862
$
249
$
864
$
(527)
$
2,776
Jul. 31
After-tax impact of items of note (1)
5
–
48
–
338
391
Adjusted net income (loss) (2)
$
1,333
$
862
$
297
$
864
$
(189)
$
3,167
2019
Reported net income (loss)
$
1,688
$
982
$
503
$
724
$
31
$
3,928
Jul. 31 (3)
After-tax impact of items of note (1)
172
–
29
–
6
207
Adjusted net income (loss) (2)
$
1,860
$
982
$
532
$
724
$
37
$
4,135
(1)
Reflects the impact of items of note described above.
(2)
Non-GAAP measure.
(3)
Certain prior period information has been revised. See the “External reporting changes” section of our Report to Shareholders for the third quarter of 2020 for additional details.
CIBC’s Future Heroes Bursary program to help post-secondary students realize their ambitions of pursuing a career in health care by awarding a $2,500 bursary to 250 students across Canada over the next two years.
Over 19,000 nominations were received by CIBC’s Holidays for Heroes program which invited Canadians to nominate frontline health care workers to receive a total of 30 million Aventura® travel rewards points to use to recharge and reconnect with family.
We also continued to support a more inclusive society by:
Announcing additional specific measures at CIBC to combat anti-Black systemic racism, including representation goals for Black executives, and playing an active role in leading change across the industry through the role of CIBC’s President and CEO, Victor G. Dodig as co-Chair of the BlackNorth Initiative.
Celebrating the LGBTQ+ community through Pride month, Persons with Disabilities through Global Accessibility Awareness Day and National AccessAbility Week, and Indigenous Peoples through National Indigenous History Month and National Indigenous People’s Day.
The Board of Directors of CIBC reviewed this news release prior to it being issued. CIBC’s controls and procedures support the ability of the President and Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) of CIBC to certify CIBC’s third quarter financial report and controls and procedures. CIBC’s CEO and CFO will voluntarily provide to the U.S. Securities and Exchange Commission a certification relating to CIBC’s third quarter financial information, including the unaudited interim consolidated financial statements, and will provide the same certification to the Canadian Securities Administrators.
United Kingdom and Europe, the Basel Committee on Banking Supervision’s global standards for capital and liquidity reform, and those relating to bank recapitalization legislation and the payments system in Canada; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions, and interest rate and liquidity regulatory guidance; the resolution of legal and regulatory proceedings and related matters; the effect of changes to accounting standards, rules and interpretations; changes in our estimates of reserves and allowances; changes in tax laws; changes to our credit ratings; political conditions and developments, including changes relating to economic or trade matters; the possible effect on our business of international conflicts and terrorism; natural disasters, disruptions to public infrastructure and other catastrophic events; reliance on third parties to provide components of our business infrastructure; potential disruptions to our information technology systems and services; increasing cyber security risks which may include theft or disclosure of assets, unauthorized access to sensitive information, or operational disruption; social media risk; losses incurred as a result of internal or external fraud; anti-money laundering; the accuracy and completeness of information provided to us concerning clients and counterparties; the failure of third parties to comply with their obligations to us and our affiliates or associates; intensifying competition from established competitors and new entrants in the financial services industry including through internet and mobile banking; technological change; global capital market activity; changes in monetary and economic policy; general business and economic conditions worldwide, as well as in Canada, the U.S. and other countries where we have operations, including increasing Canadian household debt levels and global credit risks; our success in developing and introducing new products and services, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels; changes in client spending and saving habits; our ability to attract and retain key employees and executives; our ability to successfully execute our strategies and complete and integrate acquisitions and joint ventures; the risk that expected synergies and benefits of an acquisition will not be realized within the expected time frame or at all; and our ability to anticipate and manage the risks associated with these factors. This list is not exhaustive of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Additional information about these factors can be found in the “Management of risk” section of our 2019 Annual Report, as updated by our quarterly reports. Any forward-looking statements contained in this news release represent the views of management only as of the date hereof and are presented for the purpose of assisting our shareholders and financial analysts in understanding our financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. We do not undertake to update any forward-looking statement that is contained in this news release or in other communications except as required by law.
8:00 a.m. (ET) and is available in English (416-340-2217, or toll-free 1-800-806-5484, passcode 1028175#) and French (514-392-1587, or toll-free 1-800-898-3989, passcode 7008374#). Participants are asked to dial in 10 minutes before the call. Immediately following the formal presentations, CIBC executives will be available to answer questions.
www.cibc.com/ca/investor-relations/quarterly-results.html. ” data-reactid=”76″>A live audio webcast of the conference call will also be available in English and French at www.cibc.com/ca/investor-relations/quarterly-results.html.
www.cibc.com, Investor Relations section, prior to the conference call/webcast. We are not incorporating information contained on the website in this news release.” data-reactid=”77″>Details of CIBC’s fiscal 2020 third quarter results, as well as a presentation to investors, will be available in English and French at www.cibc.com, Investor Relations section, prior to the conference call/webcast. We are not incorporating information contained on the website in this news release.
www.cibc.com/ca/investor-relations/quarterly-results.html.” data-reactid=”78″>A telephone replay will be available in English (905-694-9451 or 1-800-408-3053, passcode 4865749#) and French (514-861-2272 or 1-800-408-3053, passcode 2686343#) until 11:59 p.m. (ET) September 27, 2020. The audio webcast will be archived at www.cibc.com/ca/investor-relations/quarterly-results.html.
https://www.cibc.com/en/about-cibc/media-centre.html.” data-reactid=”79″>About CIBC CIBC is a leading North American global financial institution with 10 million personal banking, business, public sector and institutional clients. Across Personal and Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, CIBC offers a full range of advice, solutions and services through its leading digital banking network, and locations across Canada, in the United States and around the world. Ongoing news releases and more information about CIBC can be found at https://www.cibc.com/en/about-cibc/media-centre.html.
