CIBC’s revenue growth outpaces expenses, proposes stock split

TORONTO — CIBC’s strategy of investing in its own growth led to higher revenue and profits from lending, fees and capital markets in the first quarter that outpaced the rise in expenses, the chief executive said Friday. the direction Victor Dodig.

The 11% growth in revenue reported for the quarter ending Jan. 31 was slightly higher than the 10% growth in expenses as CIBC continues to invest in technology and other client-focused investments to grow its share Steps.

“We have invested significant resources to improve our banking capabilities, grow our market share and streamline our cost base. I think you can see all of that in our results,” Dodig said on a conference call with analysts. financiers to discuss the bank’s first project. – quarterly results.

Just this week, the bank announced it was investing in cloud-based banking platform Pollinate to bring its digital banking and payments system to Tyl small and medium businesses in Canada. In January, the bank also reached an agreement to use nCino Inc.’s cloud platform to streamline business banking.

Dodig said the investments will not only help the bank grow, but also better prepare it for a future where open banking – which allows people to securely share their banking details with third parties such as tech companies – is the norm.

To help boost personal banking, CIBC also invested to take over Costco’s MasterCard wallet last year, with existing customers due to switch to CIBC-linked cards in March.

While growth-related investments have helped drive up costs, chief financial officer Hratch Panossian said spending has also increased due to performance-based compensation, inflation and rising activity, including business development, offset by some efficiency improvements.

He said if the bank focused on growth, it could also cut spending if necessary.

“We have the ability to manage the pace of investment in the face of a more challenging operating environment in order to work towards our goal of positive operating leverage.”

Overall, CIBC reported earnings of $1.87 billion or $4.03 per diluted share for the quarter ended Jan. 31, up from $1.63 billion or $3.55 per diluted share in the same quarter a year earlier.

Revenue totaled $5.50 billion for the quarter, compared to $4.96 billion, while provisions for credit losses were $75 million, compared to $147 million in the same quarter last year. last.

On an adjusted basis, CIBC says it earned $4.08 per diluted share for the quarter, up from adjusted earnings of $3.58 per diluted share a year earlier.

Analysts on average had expected adjusted earnings of $3.67 per share, according to financial markets data firm Refinitiv.

Scotiabank analyst Meny Grauman noted that trading revenue, up 75% from the previous quarter, was 49% above his expectations.

Grauman said it was a key factor in beating its overall estimates, but said it would be a mistake to dismiss the results as just a trade beat, as the bank also posted loan growth of 14%, a lever slightly positive operating results and positive results in its property. and health insurance business.

“As we look at the results, we see a lot to highlight beyond the strength of financial markets,” he said in a note.

CIBC also proposed a two-for-one stock split when releasing results on Friday, subject to shareholder approval at its April 7 annual meeting, as well as Toronto Stock Exchange requirements. and the New York Stock Exchange.

Dodig said the stock split proposal comes after the bank saw its share price appreciate significantly, with the bank’s shares trading at around $160 per share in recent weeks, compared to just over of $100 per share before the pandemic.

“Now is a good time to announce a spin-off, which would make our shares more accessible to many retail investors,” Dodig said.

This report from The Canadian Press was first published on February 25, 2022.

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Ian Bickis, The Canadian Press