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Investing.com -- Fitch Ratings has confirmed the Long-Term Issuer Default Rating (IDR) and Short-Term IDR of the Canadian Imperial Bank of Commerce (NYSE:CM) ( CIBC (TSX:CM)) at ’AA-’ and ’F1+’ respectively, maintaining a stable outlook. The ratings of CIBC’s subsidiaries including CIBC Bank USA, CIBC Capital Markets (Europe) S.A., CIBC World Markets Limited, CIBC Capital Trust, and Canadian Imperial Holdings, Inc. have also been affirmed.
The ratings reflect CIBC’s diversified business model, strong position in the Canadian mass affluent market, and substantial contributions from its commercial banking and wealth management sectors. As the fifth largest bank in Canada, CIBC has one of the highest concentrations of residential mortgages among its peers, making up nearly 50% of its loan book.
CIBC’s operating environment is largely influenced by its Canadian operations, as most of its assets and earnings are generated domestically. The bank’s loan growth was above the peer average during the pandemic, but moderated in 2024. As of the second quarter of 2025, CIBC’s loan portfolio had grown by 6% year on year, aligning with the growth rate of its peers.
The U.S. tariffs may have a smaller direct impact on CIBC’s commercial and corporate lending book compared to its peers. However, the bank could be affected by a general weakening of the Canadian economy due to its larger exposure to the Canadian consumer. In response, CIBC has been reviewing its portfolio to identify sectors directly impacted by the tariffs and developing mitigation strategies.
CIBC’s gross impaired loan ratio rose slightly to 57 basis points as of the second quarter of 2025, up from 52 basis points in previous years. The majority of these were in the consumer portfolio, particularly in the mortgage sector. However, these loans are not expected to result in significant write-offs due to the low loan-to-value.
The bank has successfully transitioned its U.S. commercial real estate portfolio, reducing its focus on the office portfolio and increasing its focus on the commercial and industrial sector. Fitch views CIBC’s exposure to U.S. office loans, at 1% of total loans, as manageable.
CIBC continued to see profitability improvements through 2024, particularly due to the fast resolution of U.S. commercial real estate problem credits and the benefits from various operational efficiency initiatives. Like its peers, CIBC experienced an increased trading revenue in the first half of 2025 due to market volatility caused by tariff uncertainty. However, this trend is not expected to continue, and capital markets results should normalize.
To mitigate the risk of tariffs, CIBC has increased its level of performing provisions as the forward-looking indicators of its base case scenarios have worsened. As with the rest of the industry, some provision build is expected for the remainder of 2025.
CIBC’s CET1 ratio remains strong at 13.4% at the second quarter of 2025, above the regulatory minimum of 11.5%. Management plans to maintain a buffer of at least 75 basis points to 100 basis points over regulatory minimums in the medium term to support organic growth. This could be increased if the macroeconomic environment remains uncertain.
CIBC’s loan to deposit ratio stood at 101% as of the second quarter of 2025, in the middle of the peer range. The bank continues to see consistent deposit growth in both Canadian and U.S. businesses. CIBC has a large retail customer deposit base, particularly among the mass affluent, supported by diversified wholesale funding channels.
Fitch does not foresee a ratings upgrade in the near future. The rating is constrained by Fitch’s assessment of the Canadian operating environment. Any positive reassessment would entail a sustained reduction in vulnerabilities around Canadian household indebtedness and elevated housing prices. Negative rating pressure could come from an increase in residential mortgage concentration above 60% of gross loans, an increase in impaired loans above 1% of gross loans, a CET1 ratio approaching or falling below 12% on a sustained basis, or from large trading losses or any significant conduct or operational losses.
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