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Canadian Imperial (CM) Stock Up Despite Q2 Earnings Decline
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Canadian Imperial Bank of Commerce (CM - Free Report) shares gained 3.3% since the release of its fiscal second-quarter 2023 (ended Apr 30) results last week. Adjusted earnings per share of C$1.70 declined 4% from the prior-year quarter.
Results were adversely impacted by higher expenses and a significant rise in provisions. However, a rise in revenues, an improvement in loan demand and a strong balance sheet position were the supporting factors.
After considering several non-recurring items, net income was C$1.69 billion ($1.25 billion), reflecting a year-over-year rise of 11%.
Revenues Improve, Costs Rise Marginally
Total revenues were C$5.70 billion ($4.21 billion), up 6% year over year. The improvement was driven by higher net interest income and non-interest income.
Net interest income came in at C$3.19 billion ($2.35 billion), growing 3% year over year. Non-interest income increased 10% to C$2.51 billion ($1.85 billion).
Non-interest expenses totaled C$3.14 billion ($2.32 billion), increasing marginally year over year.
The adjusted efficiency ratio was 56% at the end of the reported quarter, up from 55.8% as of Apr 30, 2022. An increase in the efficiency ratio indicates a deterioration in profitability.
Provision for credit losses was C$438 million ($332.32 million), up 45% from the prior-year quarter.
Balance Sheet Strong, Capital Ratios Improve
As of Apr 30, 2023, total assets were C$935.2 billion ($690.07 billion), up 1% from the prior quarter. Net loans and acceptances increased 1% to C$538.3 billion ($397.2 billion), while deposits grew 2% to C$705.9 billion ($520.87 billion).
As of Apr 30, 2023, the Common Equity Tier 1 ratio was 11.9% compared with 11.7% in the prior-year quarter. The Tier 1 capital ratio was 13.4% compared with 13.2% in the prior-year period. The total capital ratio was 15.5%, up from 15.3% in the prior-year quarter.
Profitability Ratio Weakens
Adjusted return on common shareholders’ equity was 13.9% at the end of the fiscal second quarter, down from the prior year’s 15.2%.
Our Take
Given rising rates and loan growth, Canadian Imperial is likely to witness steady improvement in revenues. However, a challenging operating backdrop, steadily increasing provisions and rising expenses remain near-term concerns.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
Bank of Montreal (BMO - Free Report) reported second-quarter fiscal 2023 (ended Apr 30) adjusted earnings per share of C$2.93, which declined 9.2% year over year.
During the reported quarter, BMO completed the acquisition of Bank of the West and its subsidiaries from BNP Paribas. The company recorded higher revenues, a rise in loans and deposit balances during the quarter. However, an increase in expenses and higher provisions were the undermining factors.
Toronto-Dominion Bank (TD - Free Report) reported second-quarter fiscal 2023 (ended Apr 30) adjusted net income of C$3.75 billion ($2.77 billion), which increased 1% from the prior-year quarter.
TD recorded a rise in net interest income on the back of higher interest rates and decent loan demand. Also, the company’s capital ratios were solid during the quarter. However, an increase in expenses and higher provision for credit losses were major headwinds.
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Canadian Imperial (CM) Stock Up Despite Q2 Earnings Decline
Canadian Imperial Bank of Commerce (CM - Free Report) shares gained 3.3% since the release of its fiscal second-quarter 2023 (ended Apr 30) results last week. Adjusted earnings per share of C$1.70 declined 4% from the prior-year quarter.
Results were adversely impacted by higher expenses and a significant rise in provisions. However, a rise in revenues, an improvement in loan demand and a strong balance sheet position were the supporting factors.
After considering several non-recurring items, net income was C$1.69 billion ($1.25 billion), reflecting a year-over-year rise of 11%.
Revenues Improve, Costs Rise Marginally
Total revenues were C$5.70 billion ($4.21 billion), up 6% year over year. The improvement was driven by higher net interest income and non-interest income.
Net interest income came in at C$3.19 billion ($2.35 billion), growing 3% year over year. Non-interest income increased 10% to C$2.51 billion ($1.85 billion).
Non-interest expenses totaled C$3.14 billion ($2.32 billion), increasing marginally year over year.
The adjusted efficiency ratio was 56% at the end of the reported quarter, up from 55.8% as of Apr 30, 2022. An increase in the efficiency ratio indicates a deterioration in profitability.
Provision for credit losses was C$438 million ($332.32 million), up 45% from the prior-year quarter.
Balance Sheet Strong, Capital Ratios Improve
As of Apr 30, 2023, total assets were C$935.2 billion ($690.07 billion), up 1% from the prior quarter. Net loans and acceptances increased 1% to C$538.3 billion ($397.2 billion), while deposits grew 2% to C$705.9 billion ($520.87 billion).
As of Apr 30, 2023, the Common Equity Tier 1 ratio was 11.9% compared with 11.7% in the prior-year quarter. The Tier 1 capital ratio was 13.4% compared with 13.2% in the prior-year period. The total capital ratio was 15.5%, up from 15.3% in the prior-year quarter.
Profitability Ratio Weakens
Adjusted return on common shareholders’ equity was 13.9% at the end of the fiscal second quarter, down from the prior year’s 15.2%.
Our Take
Given rising rates and loan growth, Canadian Imperial is likely to witness steady improvement in revenues. However, a challenging operating backdrop, steadily increasing provisions and rising expenses remain near-term concerns.
Canadian Imperial Bank of Commerce Price, Consensus and EPS Surprise
Canadian Imperial Bank of Commerce price-consensus-eps-surprise-chart | Canadian Imperial Bank of Commerce Quote
CM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Canadian Banks
Bank of Montreal (BMO - Free Report) reported second-quarter fiscal 2023 (ended Apr 30) adjusted earnings per share of C$2.93, which declined 9.2% year over year.
During the reported quarter, BMO completed the acquisition of Bank of the West and its subsidiaries from BNP Paribas. The company recorded higher revenues, a rise in loans and deposit balances during the quarter. However, an increase in expenses and higher provisions were the undermining factors.
Toronto-Dominion Bank (TD - Free Report) reported second-quarter fiscal 2023 (ended Apr 30) adjusted net income of C$3.75 billion ($2.77 billion), which increased 1% from the prior-year quarter.
TD recorded a rise in net interest income on the back of higher interest rates and decent loan demand. Also, the company’s capital ratios were solid during the quarter. However, an increase in expenses and higher provision for credit losses were major headwinds.