Canadian Imperial Bank of Commerce fell far short of analyst estimates as the lender set aside more than expected for souring loans.
(Bloomberg) — Canadian Imperial Bank of Commerce fell far short of analyst estimates as the lender set aside more than expected for souring loans.
Provisions for credit losses totaled C$736 million ($543 million) in the fiscal third quarter, according to a statement Thursday, more than the C$456 million analysts had predicted. The bank had put aside C$438 million in the previous three months. The Toronto-based bank’s C$1.52 of adjusted earnings per share missed an average analyst estimate of C$1.68.
Chief Executive Officer Victor Dodig cited “a more challenging economic environment,” while saying the bank has a “disciplined approach to resource allocation.”
After Canada’s six biggest banks spent months underperforming the wider market, expectations were low going into earnings season thanks especially to expenses, shaky consumers and higher interest rates around the world. One analyst, Darko Mihelic of RBC Capital Markets, cited gloomy capital markets and a lack of deals when he cut his profit forecasts for CIBC and its rivals earlier this month.
It has been a relatively dour time for Canadian banking. Royal Bank of Canada, the country’s biggest lender, said last week it would cut as much as 2% of its staff after surging expenses dinged results.
Canadian officials have been looking closely at the country’s finance industry. In June, the national banking regulator set higher capital requirements on its largest lenders for the second time in about six months, a signal that it’s concerned about risk. When the announcement was made, CIBC was the closest of the country’s six biggest banks to the new regulatory minimum.
Higher interest rates have been a mixed bag for the banking industry. They’ve boosted lending revenue, while raising the chance that borrowers might face trouble.
Net income slumped 14% from a year earlier to C$1.43 billion, or C$1.47 a share.
CIBC shares have risen 1% this year through Wednesday, compared with a 3% drop for the S&P/TSX Commercial Banks Index.
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