Canadian Imperial Bank of Commerce CM reported fourth-quarter fiscal 2020 (ended Oct 31) results. Adjusted earnings per share came in at C$2.79 ($2.11), down 2% from the prior-year quarter reported figure.
Results were unfavorably impacted by lower revenues. However, fall in provisions, controlled expenses and strong balance-sheet position acted as tailwinds, pushing shares of Canadian Imperial 2.6% higher on the NYSE, following the release.
After considering several non-recurring items, net income was C$1.02 billion ($0.77 billion), reflecting a decline of 15% year over year.
Low Adjusted Revenues Partly Offset by Fall in Costs
Adjusted total revenues declined 4.2% year over year to C$4.6 billion ($3.48 billion). The decrease resulted from lower non-interest and net interest income.
Net interest income was C$2.8 billion ($2.1 billion), down slightly from the year-ago quarter. Non-interest income fell 8.1% year over year to C$1.81 billion ($1.37 billion).
Adjusted non-interest expenses totaled C$2.6 billion ($1.97 billion), down 2.3% from the year-ago quarter.
Adjusted efficiency ratio was 56.4% at the end of the reported quarter, up from 56% as of Oct 31, 2019. A rise in the efficiency ratio indicates a fall in profitability.
Total provision for credit losses declined 27.6% year over year to C$291 million ($220 million).
Strong Balance Sheet & Capital Ratios
Total assets were C$770 billion ($578 billion) as of Oct 31, 2020, slightly up from the prior-quarter level. Net loans and acceptances increased marginally to C$416.4 billion ($312.5 billion), while deposits climbed slightly to C$570.7 billion ($428.3 billion), on a sequential basis.
As of Oct 31, 2020, Common Equity Tier 1 ratio was 12.1%, up from the prior-year quarter reported figure of 11.6%. Furthermore, Tier 1 capital ratio was 13.6% compared with 12.9% as of Oct 31, 2019. Total capital ratio was 16.1%, up from the prior-year quarter’s 15%.
Adjusted return on common shareholders’ equity was 13.5% at the end of the fiscal fourth quarter, down from the prior year’s 14.2%.
Our Viewpoint
Given anticipations of an improving economy and loan growth, Canadian Imperial will likely witness a steady improvement in revenues. However, lower revenues and a challenging operating backdrop are major concerns.
The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Bank of Montreal’s BMO fourth-quarter fiscal 2020 (ended Oct 31) adjusted net income came in at C$1.61 billion ($1.22 billion), slightly up year over year. The results reflected a significant rise in revenues. Nonetheless, elevated provisions and expenses were on the downside. Moreover, loan and deposit balances declined.
Barclays (LON:BARC) BCS reported third-quarter net income attributable to ordinary equity holders of £611 million ($789 million) against the net loss recorded in the prior-year quarter. Results were primarily hurt by an increase in credit impairment charges as well as lower revenues. Also, a rise in operating expenses was a major headwind.
Royal Bank of Canada RY delivered fourth-quarter fiscal 2020 (ended Oct 31, 2020) net income of C$3.2 billion ($2.4 billion), up 1% from the prior-year quarter’s reported tally. The bank witnessed fall in expenses and provisions. Yet, lower revenues, along with decline in loans and deposit balances, were deterrents.
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