CIBC posts loss of $1.46B in first quarter, pulled down by U.S. credit woes

Romina Maurino, THE CANADIAN PRESS
TORONTO - Canadian Imperial Bank of Commerce (TSX:CM) will manage risk better this year with the help of worldwide experts after a massive first-quarter loss, the bank's executives assured shareholders Thursday.

Chief risk officer Tom Woods, who shifted to that job from chief financial officer in January, said CIBC is working with outside advisers to review its processes and find better ways to predict the impact of exposures.

CIBC, the Canadian bank hardest hit by the credit crunch in the United States, reported a $1.46 billion first-quarter net loss amid huge charges and losses arising from its entanglement in U.S. debt market turmoil.

The bank maintained its 87-cent-per-share quarterly dividend and observed that "balance sheet strength will remain CIBC's most important priority in 2008."

The November-January loss, worth $4.39 per share, compared with year-earlier earnings of $770 million, $2.11 per share.

The quarter included more than $2.9 billion in writedowns on bad-debt protection purchased from ACA Financial Guaranty Corp. and other American bond insurers. Those charges amounted to $1.96 billion or $5.75 per share after taxes.

There also were $473 million pre-tax in mark-to-market losses on collateralized debt obligations and residential mortgage-backed securities, along with $108 million in losses on the sale of U.S. businesses, management changes and the exit and restructuring of other businesses.

"Our losses related to the U.S. residential mortgage market are a significant disappointment and are not aligned with our strategic imperative of consistent and sustainable performance," stated CEO Gerald McCaughey.

"Our focus is to get CIBC back on the strategic track we set for the organization which has, for the past two years, resulted in significant value for our shareholders."

Earnings in CIBC's retail banking division were up 15 per cent from a year earlier to $657 million, but the CIBC World Markets division lost $2.2 billion.

The bank noted that "market and economic conditions relating to the financial guarantors may change in the future, which could result in significant future losses."

Interest income rose nine per cent from a year earlier to $1.15 billion, but the negative $1.675 billion in non-interest income resulted in reported revenue of minus $521 million, compared with year-ago revenue of $3.09 billion.

Provision for credit losses increased 20 per cent to $172 million, "mainly due to lower recoveries in the corporate lending portfolio and higher losses in the (credit) cards portfolio resulting from volume growth," the bank said.

Its outlook calls for slower Canadian economic growth in the first half of this year "as the U.S. appears to be close to a recession," reviving to "moderate growth in the second half of 2008, helped by significant central bank interest rate cuts and fiscal stimulus."

For CIBC World Markets, "mergers and acquisition and equity activity will likely be slower given a softer stock market and credit concerns affecting global leveraged deals," the bank said.

"We expect loan demand to increase due to reduced investor appetite for commercial paper. U.S. economic softness and a strong Canadian dollar could lead to a less favourable period for corporate credit risk in certain parts of the Canadian economy."

CIBC shares were off 86 cents at $68.14 late in the morning on the TSX, with a 52-week range between $107.45 and $64.25.

© The Canadian Press, 2008