Canadian Imperial Bank of Commerce Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Victor Dodig discussed the operating environment, trade tensions, and CIBC's strong first quarter performance with revenues up 17% to $7.3 billion, adjusted earnings per share at record $2.20, and adjusted ROE 15.3%.
• CIBC's strategy includes growing mass affluent and private wealth, expanding digital first personal banking, delivering connectivity, and enabling/simplifying/protecting the bank. The bank has consistent execution across these priorities.
• Business unit highlights: Canadian Personal and Business Banking delivering modern experiences, North American Commercial Banking with strong risk control growth, North American Wealth Management benefiting from market sentiment, Capital Markets with strong trading revenue, and Corporate and Other with a net loss due to legal provision.

Segment Performance

• Canadian Personal and Business Banking: Adjusted net income increased 7%, revenues up 9%, pre-provision pre-tax earnings up 11%. Mass affluent clients grew 4.5 times faster than the rest of the client base. Ranked top two in Canada for market share growth and demand deposits.
• North American Commercial Banking: Canada: loans and deposits up 8% and 10% respectively. US: loans and deposits grew above market rates, credit losses down from prior year.
• North American Wealth Management: Canada ranked number one in long-term mutual fund net sales. US: strong asset management fees.
• Capital Markets: Net income up 28%, revenues up 25% driven by seasonally strong global markets activity.
• Corporate and Other: Net loss of $60 million, with a legal provision offsetting favorable treasury revenue and higher revenue from CIBC Caribbean.

Guidance

• CET1 ratio expected to trend lower as client activity picks up but will continue to grow organically and return capital to shareholders.
• Expect positive operating leverage for the full year.
• Revenue and expense growth expected to moderate in segments like US Commercial Banking and Wealth Management for the balance of the year.

Risks

• Trade tensions between Canada and US with potential tariffs impacting sectors.
• Macroeconomic uncertainties affecting credit portfolios and potential normalization of credit picture.
• Legal provision in Corporate and Other segment impacting results.

Q: Good margin expansion in PMD business, driven by term to demand deposits. How about deposit mix and NIM going forward?

A: Hratch Panossian mentioned shift from GICs to demand deposits, strong demand deposit growth (9% year-over-year), good margins on those deposits, and deposits going into investments depending on client situation.

Q: How is tariff uncertainty playing out across CIBC's footprint and expected evolution?

A: Victor Dodig stated clients are tentative without certainty, bank is strong capital-wise, and advised on addressing issues like digital services tax and aluminum/steel dumping.

Q: Where is client activity picking up and capital management?

A: Shawn Beber, Harry Culham, and Susan Rimmer discussed strength in US loan and deposit growth, healthy pipeline, and CIBC managing capital north of 12.5% with continued buybacks.

Q: Margin performance in Canada and US, and buybacks?

A: Rob Sedran said Canadian margin driven by deposit mix, US margin may settle due to seasonal factors, and intent to continue buybacks within authorized amount.

Q: Consumer credit card and unsecured lending trends?

A: Frank Guse said consumer net write-offs and delinquency down, focusing on mass affluent segment with strong collateral in mortgages.

Q: Credit normalization and legal provision?

A: Victor Dodig explained credit normalization as medium-term contributor to ROE, and Rob Sedran said legal provision is a closed issue for P&L.

Q: Bottom-up stress test on wholesale portfolio for tariffs?

A: Frank Guse said performing allowance build accounted for downside scenario, with small fraction of client base directly impacted by trade uncertainties.