CIBC Announces Fourth Quarter and Fiscal 2013 Results

TORONTO, Dec. 5, 2013 /CNW/ - CIBC (TSX: CM) (NYSE: CM) announced net income of $836 million for the fourth quarter ended October 31, 2013, compared with $852 million for the fourth quarter of 2012. Adjusted net income⁽¹⁾ of $905 million for the quarter was up from $858 million for the fourth quarter of 2012. Reported diluted earnings per share (EPS) of $2.05 and adjusted diluted EPS⁽¹⁾ of $2.22 for the fourth quarter of 2013, compared with reported diluted EPS of $2.02 and adjusted diluted EPS⁽¹⁾ of $2.04, respectively, for the same period last year.

CIBC's results for the fourth quarter of 2013 were affected by the following items of note aggregating to a negative impact of $0.17 per share:

• $39 million ($37 million after-tax, or $0.09 per share) restructuring charge relating to FirstCaribbean International Bank Limited (CIBC FirstCaribbean);
• $35 million ($19 million after-tax, or $0.05 per share) impairment of an equity position associated with our exited U.S. leveraged finance portfolio;
• $24 million ($18 million after-tax, or $0.05 per share) expenses relating to the development and marketing of our enhanced proprietary travel rewards program and to the proposed Aeroplan transactions with Aimia Canada Inc. (Aimia) and The Toronto-Dominion Bank Group (TD) in the first quarter of 2014;
• $15 million ($11 million after-tax, or $0.03 per share) gain from the structured credit run-off business; and
• $7 million ($6 million after-tax, or $0.01 per share) amortization of intangible assets.

CIBC's reported net income of $836 million and adjusted net income⁽¹⁾ of $905 million for the fourth quarter of 2013 compared with reported net income of $890 million and adjusted net income⁽¹⁾ of $943 million for the third quarter ended July 31, 2013. Reported diluted EPS of $2.05 and adjusted diluted EPS⁽¹⁾ of $2.22 for the fourth quarter of 2013 compared with reported diluted EPS of $2.16 and adjusted diluted EPS⁽¹⁾ of $2.29 for the prior quarter.

For the year ended October 31, 2013, CIBC reported net income of $3.4 billion and adjusted net income⁽¹⁾ of $3.6 billion, compared with reported net income of $3.3 billion and adjusted net income⁽¹⁾ of $3.4 billion for 2012. Reported diluted EPS of $8.23 and adjusted diluted EPS⁽¹⁾ of $8.78 for 2013 compared with reported diluted EPS of $7.85 and adjusted diluted EPS⁽¹⁾ of $8.07 for 2012.

CIBC's adjusted return on common shareholders' equity⁽¹⁾ was 22.3% for the year ended October 31, 2013 and the Basel III Common Equity Tier 1 ratio was 9.4% as at October 31, 2013.

"CIBC reported another year of solid progress in 2013," says Gerry McCaughey, CIBC President and Chief Executive Officer. "Our results reflect the strength of our client-focused strategy."

"Within an environment that continues to be challenging, CIBC has the right strategy to continue to deliver value," adds McCaughey. "In 2014, we will continue to focus on cultivating deeper relationships with our clients and pursing strategic growth."

Performance against Objectives

Core business performance
Retail and Business Banking reported net income of $2.5 billion in 2013, up from $2.3 billion in 2012, as a result of wider spreads, volume growth across most retail products and higher fees.

Retail and Business Banking continued to make strategic investments throughout 2013 in areas that are enhancing the relationship we have with, and the value we provide to, our clients:

• As part of CIBC's commitment to provide our clients with the market leading travel rewards credit card, CIBC launched an enhanced Aventura card and signed a 10-year extension with Aimia to continue to offer our clients Aeroplan credit cards.  Combined, our clients have the largest offering of choice in the Canadian marketplace.
• We became the first and remain the only bank to launch a new mobile payments App for clients, the CIBC Mobile Payment App.
• We introduced the CIBC Mobile Business App, offering online cash management solutions for our business banking clients.
• More than one million active clients are now using our award-winning mobile banking App to perform many of their everyday banking transactions from their mobile device.
• We launched the CIBC Everyday Banking Bundle and the CIBC Premium Banking Bundle to make it easier for our clients to bank with us and reward them for doing so.
• The ongoing conversion of our FirstLine mortgage clients into CIBC-brand mortgages continues to exceed targets, and supports our focus on client retention by introducing these clients to the benefits of a broader banking relationship with CIBC.

Today, CIBC and the Greater Toronto Airport Authority (GTAA) announced an innovative multi-year partnership that establishes CIBC as the exclusive financial services provider of full service banking for the 35 million people who pass through Toronto Pearson Airport each year. 

"We made good progress against our priorities in 2013 of building deeper relationships with our clients, enhancing our sales and service capabilities, and acquiring and retaining clients," says David Williamson, Group Head, Retail and Business Banking. "As a result, we accelerated revenue, increased our margins and improved our client satisfaction scores."

Wealth Management reported net income of $388 million in 2013, compared with $339 million in 2012. Adjusting for items of note⁽¹⁾, net income of $392 million was up $87 million from $305 million in 2012. Net income increased as a result of higher revenue across all businesses.

Wealth Management strengthened its business on many fronts in 2013 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:

• Announcement of our intent to acquire Atlantic Trust, a U.S. private wealth management firm, as part of our strategic plan to grow our North American wealth management business.  We are on track with our transition plans and expect to complete this acquisition in the first quarter of fiscal 2014 following regulatory approvals.
• We achieved our 19^th consecutive quarter of positive retail net sales of long-term mutual funds and had record long-term net sales of $4.8 billion.
• CIBC Private Wealth Management and CIBC Wood Gundy successfully attracted new clients and assets to the Wealth Management platform at an accelerated rate during the second half of the year.
• We made significant enhancements to the CIBC Investor's Edge platform, with the launch of a new online interface to provide clients with additional tools and functionality to monitor their investment portfolios, including a new Exchange Traded Funds (ETF) Centre and enhanced research centre that includes equity reports from Morningstar and Thomson-Reuters.
• CIBC Wood Gundy and CIBC Investor's Edge continue to strengthen client satisfaction indicators.

"We will continue to invest in our Wealth Management platform, domestically and internationally, to enhance the client experience and strengthen shareholder returns," says Victor Dodig, Group Head, Wealth Management.

Despite ongoing uncertainty in global markets, Wholesale Banking delivered strong results, reporting net income of $716 million, compared with $613 million in 2012. Adjusting for items of note⁽¹⁾, net income of $834 million in 2013 compared with net income of $680 million in 2012.

Wholesale Banking's objective is to be the premier client-focused wholesale bank centred in Canada, with a reputation for consistent and sustainable earnings, for sound risk management, and for being a well-managed firm known for excellence in everything we do. During 2013, Wholesale Banking:

• Ranked as #1 in Canadian equity markets in the annual Brendan Wood International survey by institutional investors who recognized the leadership demonstrated by CIBC's equity research, sales and trading teams and investor conferences.
• Named top forecaster of Australian and Canadian dollars by Bloomberg for the four quarters ended June 30, 2013.
• Ranked #1 in Canadian equity trading by volume, value and number of trades by TSX and ATS Market Share Report, 2009-present.
• Led or co-led several key transactions, most notably Choice Properties Real Estate Investment Trust's $460 million IPO of Trust Units, $600 million inaugural bond offering and $500 million senior unsecured credit facility.

Subsequent to the quarter-end, on November 29, 2013, CIBC sold an equity investment that was previously acquired through a loan restructuring in CIBC's exited European leveraged finance business. The transaction will result in an after-tax gain, net of associated expenses, of approximately $50 million in the first quarter of 2014.

"Wholesale Banking delivered high quality and consistent performance in 2013, despite continued challenging market conditions globally," says Richard Nesbitt, Chief Operating Officer.

While investing in our core Wholesale Banking strategy, CIBC continued to actively manage and reduce its structured credit run-off portfolio. In 2013, notional exposures declined by $5.5 billion as a result of sales and terminations of positions, as well as normal amortization.

Strong fundamentals
While investing in its core businesses, CIBC has continued to strengthen its key fundamentals. In 2013, CIBC maintained its capital strength, competitive productivity and sound risk management:

• CIBC's capital ratios are strong, including Basel III Common equity Tier 1 ratio of 9.4%, and Tier 1 and Total capital ratios of 11.6% and 14.6% at October 31, 2013;
• Credit quality has remained stable, with CIBC's loan loss ratio of 44 basis points compared with 53 basis points in 2012; and
• Market risk, as measured by average Value-at-Risk, was $4.6 million in 2013 compared with $4.9 million in 2012.

Making a difference in our Communities
As a leader in community investment, CIBC is committed to supporting causes that matter to its clients, employees and communities. During the fourth quarter of 2013:

• CIBC continued its long-term commitment to supporting breast cancer initiatives. The 2013 Canadian Breast Cancer Foundation CIBC Run for the Cure raised $27 million, including more than $3 million contributed by Team CIBC through pledges, fundraising activities and donations to the CIBC Pink Collection and close to $500,000 raised by students across Canada as part of the Post Secondary Challenge. CIBC was also proud to co-sponsor the Pink Tour, which made its final stop in October after bringing breast health education to 90 communities across Ontario.
• CIBC marked its fourth year as title sponsor of the CIBC 401 Bike Challenge, a three-day, 576-kilometre ride from Toronto's Hospital for Sick Children to the Montreal Children's Hospital. A number of CIBC employees and their fellow riders raised more than $274,000 to support kids with cancer and their families through the Sarah Cook Fund of the Cedars Cancer Institute.
• In support of Canada's para athletes, CIBC marked the two-year countdown to the 2015 TORONTO Parapan Am Games and announced its multi-year commitment as the Official Banking Partner of the Canadian Paralympic Committee.

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

• Dow Jones Sustainability World Index for a 12th consecutive year, and in the Dow Jones Sustainability North American Index since its inception in 2005;
• FTSE4Good Index since 2001; and
• Jantzi Social Index since 2000.

"We are proud of the contributions we have made and the recognition we have received," says Mr. McCaughey.  "I would like to thank our employees for the work that they do in serving our clients, supporting our communities and helping CIBC achieve business success."

Fourth quarter financial highlights

Review of Retail and Business Banking fourth quarter results

Net income was $610 million, up $41 million from the fourth quarter of 2012. Adjusted net income ⁽¹⁾ was $629 million, up $58 million from the fourth quarter of 2012.

Revenue of $2,104 million was up $68 million from the fourth quarter of 2012. Excluding the impact of Treasury allocations, revenue was up $75 million from the fourth quarter of 2012.  Personal banking and business banking revenue increased primarily due to volume growth across most products and higher fees, partially offset by lower spreads in business deposits. Other revenue was down primarily due to lower treasury allocations and lower revenue in our exited FirstLine mortgage broker business.

Provision for credit losses of $215 million was down $40 million from the fourth quarter of 2012, primarily due to lower write-offs in cards, partially offset by higher losses in commercial banking.

Non-interest expenses of $1,085 million were up $55 million from the fourth quarter of 2012, mainly due to higher employee-related compensation relating to an increased number of client-facing employees, and expenses relating to the development and marketing of our enhanced proprietary travel rewards program and to the proposed Aeroplan transactions with Aimia and TD in the first quarter of 2014.

Income tax expense of $194 million was up $12 million from the fourth quarter of 2012 due to higher income.

Review of Wealth Management fourth quarter results

Net Income for the quarter was $104 million, up $20 million from the fourth quarter of 2012.

Revenue of $470 million was up $50 million from the fourth quarter of 2012, primarily due to higher average client assets under management driven by market appreciation and higher net sales of long-term mutual funds, higher contribution from our investment in American Century Investments, and higher fee-based revenue.

Non-interest expenses of $334 million were up $26 million from the fourth quarter of 2012, primarily due to higher performance-based compensation.

Review of Wholesale Banking fourth quarter results

Net income for the quarter was $210 million, compared with net income of $217 million for the third quarter of 2013.  Adjusted net income ⁽¹⁾ for the quarter was $218 million, compared with $223 million for the prior quarter.

Revenue of $522 million was down $74 million from the third quarter, primarily due lower Capital Markets revenue and a loss related to impairment of an equity position associated with our exited U.S. leveraged finance portfolio, partially offset by higher revenue in U.S. Real Estate Finance and the Structured Credit Run-Off business.

Net reversal of credit losses of $1 million compared with a provision for credit losses of $14 million from the third quarter, mainly due to losses in our U.S. Leveraged Finance portfolio in the prior quarter.

Non-interest expenses of $272 million were down $31 million from the third quarter, primarily due to lower performance-based compensation.

Income tax expense of $41 million was down $21 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 income was down $94 million from the fourth quarter of 2012 as a result of lower Other revenue, a higher provision for credit losses and higher non-interest expenses.

Revenue was down $24 million from the fourth quarter of 2012 mainly due to lower unallocated treasury revenue.

Provision for credit losses was up $49 million from the fourth quarter of 2012 primarily due to higher losses in CIBC FirstCaribbean.

Non-interest expenses were up $13 million from the fourth quarter of 2012 mainly due to a restructuring charge relating to CIBC FirstCaribbean.

Income tax benefit was down $8 million from the fourth quarter of 2012 mainly due to a lower 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. For a more detailed discussion, see the "Non-GAAP measures" section of CIBC's 2013 Annual Report.

The following table provides a quarterly reconciliation of non-GAAP to GAAP measures related to CIBC on a consolidated basis. For an annual reconciliation of non-GAAP to GAAP measures, see the "Non-GAAP measures" section of CIBC's 2013 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, 2013.

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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 "Performance against Objectives", "Core business performance", "Strong Fundamentals" and "Making a Difference in Our Communities" sections of this press release, and other statements we make about our operations, business lines, financial condition, risk management, priorities, targets, ongoing objectives, strategies and outlook for 2014 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 models 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 Basel Committee on Banking Supervision's (BCBS) 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; 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; 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; technological change; global capital market activity; changes in monetary and economic policy; currency value and interest rate fluctuations; general 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 Europe's sovereign debt crisis; 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