Market volatility boosted CIBC Q1 revenue

Toronto –

Market volatility led to a surge in CIBC trading activity, boosting earnings in the first quarter, but a litigation settlement held earnings down.

The bank, the first of the Big 6 to report results for the first quarter of the year, said on Friday that non-trading margins on earnings also rose in the quarter thanks to higher central bank rates. , the slowdown in loan growth followed the same trend.

Chief Executive Officer Victor Dodig said on the earnings call that “although our pipeline remains stable, loan growth has slowed due to both lower customer demand and cautious risk taking in this environment. there is,” he said.

He said while he did not go so far as to predict a full recession, banks as a whole expected the trend to mean increased pressure on the economy.

“While bullish, geopolitical tensions, persistent inflationary pressures and interest rate pressures add uncertainty, which will affect economic growth and client activity in the short term,” Dodig said. Let’s go,” he said.

The bank said it expected growth to slow, especially in the real estate sector.

“Real estate is quiet. He said he would.

“In this kind of environment, we’re going to be a little more conservative,” he said.

The comment comes as CIBC reported net income of $432 million, or 39 cents per diluted share, for the quarter ended January 31.

Revenue of $5.93 billion increased from $5.5 billion a year ago.

Adjusted earnings, excluding a $1.17 billion charge to settle a lawsuit filed by Cerberus Capital Management LP, decreased from adjusted earnings of $2.04 per diluted share in the prior quarter to It’s now $1.94 per share.

Analysts had expected an average earnings of $1.70 per share and earnings of $5.67 billion, according to estimates compiled by financial market data firm Refinitiv.

“CIBC unexpectedly made big headlines,” Barclays analyst John Aiken said in a report.

“However, we expect the market to likely temper its enthusiasm to some extent as the better-than-expected results were led by very strong trading earnings and lower-than-expected reserves,” he said.

Trading revenues increased 18% year-over-year to $610 million and loan loss reserves of $295 million increased $220 million year-over-year, but fell short of observers’ expectations .

The bank also reported a capital adequacy ratio of 11.6% for the quarter despite a lawsuit settlement, which was hailed alongside general results by analysts.

“The bottom line is that this is a positive result, that capital concerns have been removed and the group is ready for next week,” said Scotiabank analyst Menny Grauman.

This report by the Canadian Press was first published on February 24, 2023.

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