CIBC Announces Fourth Quarter and Fiscal 2014 Results

 

TORONTO, Dec. 4, 2014 /CNW/ - CIBC (TSX: CM) (NYSE: CM) today announced its results for the fourth quarter and fiscal year ended October 31, 2014.

Fourth quarter highlights

• Reported net income was $811 million, compared with $825 million for the fourth quarter a year ago, and $921 million for the prior quarter.
• Adjusted net income⁽¹⁾ was $911 million, compared with $894 million for the fourth quarter a year ago, and $908 million for the prior quarter.
• Reported diluted earnings per share (EPS) was $1.98, compared with $2.02 for the fourth quarter a year ago, and $2.26 for the prior quarter.
• Adjusted diluted EPS⁽¹⁾ was $2.24, compared with $2.19 for the fourth quarter a year ago, and $2.23 for the prior quarter.
• Reported return on common shareholders' equity (ROE) was 17.9% and adjusted ROE⁽¹⁾ was 20.1%.

CIBC's results for the fourth quarter of 2014 were affected by the following items of note aggregating to a negative impact of $0.26 per share:

• $112 million ($82 million after-tax, or $0.21 per share) charge relating to the incorporation of funding valuation adjustments (FVA) into the valuation of our uncollateralized derivatives;
• $18 million ($13 million after-tax, or $0.03 per share) costs relating to the development of our enhanced travel rewards program and in respect of the Aeroplan transactions with Aimia Canada Inc. (Aimia) and the Toronto-Dominion Bank (TD);
• $10 million ($7 million after-tax, or $0.02 per share) amortization of intangible assets; and
• $2 million ($2 million after-tax) gain from the structured credit run-off business.

For the year ended October 31, 2014, CIBC reported net income of $3.2 billion and record adjusted net income⁽¹⁾ of $3.7 billion, compared with reported net income of $3.4 billion and adjusted net income⁽¹⁾ of $3.6 billion for 2013. Reported diluted EPS of $7.86 and adjusted diluted EPS⁽¹⁾ of $8.94 for 2014 compared with reported diluted EPS of $8.11 and adjusted diluted EPS⁽¹⁾ of $8.65 for 2013.

CIBC's adjusted ROE⁽¹⁾ was 20.9% for the year ended October 31, 2014 and the Basel III Common Equity Tier 1 ratio was 10.3% as at October 31, 2014.

CIBC announced a quarterly dividend increase of 3 cents per common share to $1.03 per share.

"Our strong performance for the year was underpinned by record revenue," says Victor Dodig, CIBC President and Chief Executive Officer. "Our results show our client-focused strategies are delivering consistent and sustainable earnings."

"In 2015, we will continue to strive to be the leading bank for our clients," adds Mr. Dodig. "We will continue to invest in our businesses to better serve our clients."

Core business performance
Retail and Business Banking reported net income of $2.5 billion in 2014, up from $2.4 billion in 2013. Adjusting for items of note, net income was $2.4 billion, comparable with the prior year.

Retail and Business Banking made strategic investments throughout 2014 in areas that are enhancing the relationship we have with, and the value we provide to, our clients. Key highlights included:

• The first phase of our branch-based technology platform called COMPASS was rolled out to all of our branches, enabling our advisors to strengthen and deepen relationships with new and existing clients. Early results from the rollout are positive; and
  
• We continued to lead in delivering innovations for clients. CIBC was the first of the Big 5 banks to offer eDeposit and the first bank to deliver a cheque capture solution for business clients. CIBC was also recognized by Forrester Research for having the best mobile banking offer among the Big 5 banks.

Subsequent to the year-end, we announced a pilot program with Brink's Canada that will allow business clients to electronically deposit cash into their CIBC business account while it is still on their premises. The service uses a Brink's CompuSafe® which securely reports cash deposits to CIBC each business day, giving clients same-day credit for cash they collect from customers, before those funds reach the bank.

"This year we continued to be leaders in innovation to enhance the client experience, which contributed to deeper relationships with our clients," says David Williamson, SEVP and Group Head, Retail and Business Banking. "We also invested in our retail franchise to accelerate profitable revenue growth, and have delivered a number of new products and services over the last year that have been very well received by our clients."

Wealth Management reported net income of $471 million in 2014, compared with $385 million in 2013. Adjusting for items of note⁽¹⁾, net income of $486 million was up $97 million or 25% from $389 million in 2013.

Wealth Management strengthened its business on many fronts in 2014 in support of our strategic priorities to attract and deepen client relationships, seek new sources of domestic assets and pursue acquisitions and investments. Key highlights included:

• Completion of the acquisition of U.S. private wealth management firm Atlantic Trust, which retained 99% of its clients through the transition and has increased assets by 28% from the deal announcement;
• CIBC Investor's Edge made online investing even better for Canadians with new lower commission rates of $6.95 for all clients, and $4.95 for active traders⁽²⁾; and
• CIBC Asset Management achieved its 5th consecutive sales record for long-term mutual funds of $5.4 billion this year and surpassed the $100 billion assets under management milestone.

"Our Wealth Management businesses, including our 2014 acquisition of Atlantic Trust, are all performing well," says Steve Geist, SEVP and Group Head, Wealth Management. "We will continue to invest in our platform in 2015 and beyond to enhance the client experience and further increase Wealth Management's contribution to CIBC's overall earnings."

Wholesale Banking delivered strong results, reporting net income of $895 million, compared with $699 million in 2013. Adjusting for items of note⁽¹⁾, net income of $913 million in 2014 compared with net income of $817 million in 2013.

Wholesale Banking provides integrated credit and capital markets products, investment banking advisory services and top-ranked research to corporate, government and institutional clients around the world. During 2014, Wholesale Banking was:

• Named Canada Derivatives House Of The Year at the 2014 GlobalCapital Americas Derivatives Awards;
• Ranked the #1 IPO underwriter in Canada by Bloomberg; and
• Leader in Canadian equity trading including #1 in volume, value and number of trades by IRESS Market Technology, TSX and ATS market share report, 2009-present.

"In 2014 we continued to invest in our integrated suite of products and services to benefit our clients," says Harry Culham, Managing Director and Group Co-Head, Wholesale Banking. "We are leveraging our industry expertise to grow our global presence and support our clients as they access capital, grow and invest in Canada and in key markets around the world."

Strong fundamentals
While investing in core businesses, CIBC has continued to strengthen key fundamentals. In 2014, CIBC maintained its capital strength, competitive productivity and sound risk management practices:

• CIBC's capital ratios are strong, with a Basel III Common Equity Tier 1 ratio of 10.3%, and Tier 1 and Total capital ratios of 12.2% and 15.5% at October 31, 2014, respectively;
• Credit quality has improved, with CIBC's loan loss ratio of 38 basis points compared with 44 basis points in 2013; and
• Market risk, as measured by average Value-at-Risk, was $3.5 million in 2014 compared with $4.6 million in 2013.

Making a difference in our Communities
CIBC is committed to investing in the social and economic development of communities across Canada. During the fourth quarter of 2014, CIBC:

• Helped raise $25 million through the 2014 Canadian Breast Cancer Foundation CIBC Run for the Cure, including nearly $3 million contributed by Team CIBC through pledges, fundraising activities and donations to the CIBC Pink Collection;
• Announced a $1 million investment in the CIBC Breast Cancer Research Scientist, an endowed scientist position at Mount Sinai Hospital's prestigious Lunenfeld-Tanenbaum Research Institute in Toronto; and
• Marked the one-year countdown to the TORONTO 2015 Parapan Am Games with the help of CIBC Team Next mentors and athletes, inspiring kids at Variety Village and Holland-Bloorview Rehabilitation Centre to take part in sport.

During the quarter, CIBC was ranked among the top 10 Safest Banks in North America by Global Finance magazine and was also recognized by Mediacorp as one of Canada's Top 100 Employers for a third consecutive year. CIBC was once again named a constituent of the following widely regarded indices:

• Dow Jones Sustainability World Index for a 13th consecutive year;
• FTSE4Good Index since 2001; and
• Jantzi Social Index since 2000.

Fourth quarter financial highlights

Review of Retail and Business Banking fourth quarter results

Net income was $602 million, down $11 million from the fourth quarter of 2013. Adjusted net income ⁽²⁾ was $616 million, down $16 million from the fourth quarter of 2013.

Revenue of $2,050 million was down $37 million from the fourth quarter of 2013. Excluding the impact of the sold Aeroplan portfolio, revenue was up $78 million from the fourth quarter of 2013. Personal banking and business banking revenue increased primarily due to volume growth across most products and higher fees, partially offset by narrower spreads. Other revenue was down primarily due to the sold Aeroplan portfolio and lower revenue in our exited FirstLine mortgage broker business.

Provision for credit losses of $171 million was down $44 million from the fourth quarter of 2013, mainly due to lower write-offs and bankruptcies in the card portfolio, the impact of an initiative to enhance account management practices as well as the sold Aeroplan portfolio, and lower losses in the business lending portfolio.

Non-interest expenses of $1,076 million were up $21 million from the fourth quarter of 2013, mainly due to higher spend on strategic initiatives.

Review of Wealth Management fourth quarter results

Net Income for the quarter was $119 million, up $16 million from the fourth quarter of 2013.

Revenue of $584 million was up $114 million from the fourth quarter of 2013, primarily due to the acquisition of Atlantic Trust on December 31, 2013, higher average client assets under management driven by market appreciation and higher net sales of long-term mutual funds, and higher fee-based revenue in Retail Brokerage.

Non-interest expenses of $428 million were up $93 million from the fourth quarter of 2013, primarily due to the impact of the acquisition noted above and higher performance-based compensation.

Review of Wholesale Banking fourth quarter results

Net income for the quarter was $136 million, compared with net income of $282 million for the third quarter of 2014. Adjusted net income ⁽³⁾ for the quarter was $216 million, compared with $254 million for the prior quarter.

Revenue of $468 million was down $202 million from the third quarter, primarily due to lower Capital markets revenue, including a $112 million ($82 million after-tax) charge relating to the incorporation of FVA into the valuation of our uncollateralized derivatives - identified as an item of note - and lower revenue from Corporate and investment banking.

Provision for credit losses of $14 million compared with a provision for credit losses of $6 million in the third quarter, mainly due to losses in our U.S. real estate finance portfolio.

Non-interest expenses of $293 million were up $14 million from the third quarter, primarily due to higher performance-based compensation.

Income tax expense of $25 million was down $78 million from the third quarter, due to lower income and a decrease in the relative proportion of income earned in higher tax jurisdictions.

Review of Corporate and Other fourth quarter results

Net loss was down $54 million from the fourth quarter of 2013 as a result of higher revenue and a lower provision for credit losses.

Revenue was up $12 million from the fourth quarter of 2013.

Provision for credit losses was down $47 million from the fourth quarter of 2013 primarily due to lower losses in CIBC FirstCaribbean.

Non-interest expenses were up $21 million from the fourth quarter of 2013, mainly due to higher unallocated support costs.

Income tax benefit was up $16 million from the fourth quarter of 2013 mainly due to an increase in the relative proportion of income earned in lower tax jurisdictions and a higher TEB adjustment.



Consolidated balance sheet

Consolidated statement of income

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of cash flows

Non-GAAP measures

We use a number of financial measures to assess the performance of our business lines. Some measures are calculated in accordance with International Financial Reporting Standards (IFRS or GAAP), while other measures do not have a standardized meaning under GAAP, and accordingly, these measures may not be comparable to similar measures used by other companies. Investors may find these non-GAAP measures useful in analyzing financial performance.

The following table provides a quarterly reconciliation of non-GAAP to GAAP measures related to CIBC on a consolidated basis. For a more detailed discussion and for an annual reconciliation of non-GAAP to GAAP measures, see the "Non-GAAP measures" section of CIBC's 2014 Annual Report.

Basis of presentation
The interim consolidated financial information in this news release is prepared in accordance with IFRS and is unaudited whereas the annual consolidated financial information is derived from audited financial statements. These interim financial statements follow the same accounting policies and methods of application as CIBC's consolidated financial statements for the year ended October 31, 2014.

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The information below forms a part of this press release.

Nothing in CIBC's corporate website (www.cibc.com) should be considered incorporated herein by reference.

(The board of directors of CIBC reviewed this press release prior to it being issued.)

A NOTE ABOUT FORWARD-LOOKING STATEMENTS:
From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including in this press release, in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission and in other communications. All such statements are made pursuant to the "safe harbour" provisions of, and are intended to be forward-looking statements under, applicable Canadian and U.S. securities legislation, including the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements made in the "Core business performance", "Strong fundamentals" and "Making a difference in our Communities" sections of this press release, and other statements about our operations, business lines, financial condition, risk management, priorities, targets, ongoing objectives, strategies and outlook for calendar year 2015 and subsequent periods. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "forecast", "target", "objective" and other similar expressions or future or conditional verbs such as "will", "should", "would" and "could". By their nature, these statements require us to make assumptions and are subject to inherent risks and uncertainties that may be general or specific. A variety of factors, many of which are beyond our control, affect our operations, performance and results and could cause actual results to differ materially from the expectations expressed in any of our forward-looking statements. These factors include: credit, market, liquidity, strategic, insurance, operational, reputation and legal, regulatory and environmental risk; the effectiveness and adequacy of our risk management  and valuation models and processes; legislative or regulatory developments in the jurisdictions where we operate, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations issued and to be issued thereunder, the U.S. Foreign Account Tax Compliance Act and regulatory reforms in the United Kingdom and Europe, the Basel Committee on Banking Supervision's global standards for capital and liquidity reform and those relating to the payments system in Canada; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions, and interest rate and liquidity regulatory guidance; the resolution of legal and regulatory proceedings and related matters; the effect of changes to accounting standards, rules and interpretations; changes in our estimates of reserves and allowances; changes in tax laws; changes to our credit ratings; political conditions and developments; the possible effect on our business of international conflicts and the war on terror; natural disasters, public health emergencies, disruptions to public infrastructure and other catastrophic events; reliance on third parties to provide components of our business infrastructure; potential disruptions to our information technology systems and services, including the evolving risk of cyber attack; social media risk; losses incurred as a result of internal or external fraud; the accuracy and completeness of information provided to us concerning clients and counterparties; the failure of third parties to comply with their obligations to us and our affiliates; intensifying competition from established competitors and new entrants in the financial services industry including through internet and mobile banking; technological change; global capital market activity; changes in monetary and economic policy; currency value and interest rate fluctuations; general business and economic conditions worldwide, as well as in Canada, the U.S. and other countries where we have operations, including increasing Canadian household debt levels and the high U.S. fiscal deficit; our success in developing and introducing new products and services, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels; changes in client spending and saving habits; our ability to attract and retain key employees and executives; our ability to successfully execute our strategies and complete and integrate acquisitions and joint ventures; and our ability to anticipate and manage the risks associated with these factors. This list is not exhaustive of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. We do not undertake to update any forward-looking statement that is contained in this press release or in other communications except as required by law.

SOURCE: CIBC - Investor Relations