Canadian Imperial Bank of Commerce – commonly known as CIBC – released its Q3 numbers on Thursday August 27th. Let take a look at how it did shall we?

CIBC (Q3 2015; May to July 2015, change is from Q3 2014)

Revenues climbed 5% to a little more than $3.5B compared to $3.4B in the year ago period. Both Net-interest income and Non-interest income recorded growth but the former was the leader with an increase of $146M or 7.8% (Non-interest income rose a more modest $19M or 1%). PCL declined slightly to $189M from $195M a year ago, with improved performance coming from Retail and Business Banking but continued challenges in Wholesale Banking and Corporate and Other reporting segments.

Unfortunately top line growth was negated by a 7% rise in Non-interest expenses resulting in negative jaws for the period under review. The Bank’s Reported Efficiency Ratio declined 1% to 61.9% but when adjusted for several items (run off charges, amortization of intangible assets) it fell 20 bps to 59.3%. Given that Management did not indicate the amortization charge was related to acquisition activity, I am not keen on ignoring this charge but would more consider it a normal cost of operating the bank. Either way…the adjusting entries were not significant.

Total deposits grew an impressive $38B or 12% while total loans and acceptances net of allowance climbed $23B or 9%. Deposit growth outstripping lending saw the Bank’s Loan to Deposit Ratio end the period at 79% versus 81% last year.

Reported EPS was $2.42 versus $2.26 one year ago (+7%), while Adjusted EPS totalled $2.45 versus $2.23 (+10%). Adjustments impacted EPS by 3c and given my comment above regarding the treatment of amortization of intangibles, I would more go with reported EPS this time around. There was no impact on EPS numbers from shares outstanding.

RETAIL & BUSINESS BANKING

Total revenue in Retail & Business Banking rose $98M or 5% to $2.127B; Personal Banking revenues increased $82M or 5% and Business Banking revenues rose $21M or 5%. Other Revenue declined $5M. Personal Banking benefited from volume growth and higher spreads but volume growth in Business Banking was offset by narrower spreads. Contribution from Other fell due to lower revenue from the exited FirstLine mortgage broker business. Overall, top line growth from both areas of this segment was good.

PCL fell $12M to $165M on account of lower write-offs and bankruptcies in its card portfolio.

Non-interest expenses climbed $33M or 3% on account of higher spending on strategic initiatives. Top line growth of 5% versus cost growth of 3% resulted in positive jaws for the period under review. Retail and Business Banking’s Efficiency Ratio improved 90bps to 51.6%.

Loan growth amounted to $13.7B or 6% while total deposits climbed $9.5B or an identical 6%. The segment’s Loan to Deposit Ratio remained flat at 142%. Business lending grew faster than retail lending (10% versus 5%). Growth in Business and Government deposits also outstripped growth in Personal deposits.

The segment’s Net Interest Margin declined 1bp to 2.51%. Net income grew 8% or $47M to $636M. Not a bad set of numbers in my mind.

WEALTH MANAGEMENT

Top line growth was seen across each business line in Wealth Management (retail brokerage, asset management, private wealth management), with total revenue growing $60M or 11% to $628M. Revenues from Asset Management accounted for the lion’s share of this segment’s top line growth at 62% or $37M.

Non-interest expenses climbed less than revenues at 9% due to higher performance-based compensation and other employee-related outlays which lead to positive jaws for the period. The segment’s Efficiency Ratio improved by an impressive 1.4% to 70.5%.

AUA and AUM posted good organic growth over the period; AUA up $3B or 2%, AUM up $21B or 15%.

Net Income grew $19M or 16% YoY to reach $140M.

I am pleased by the performance of this segment and expect great things going forward.

WHOLESALE BANKING

Revenue rose $26M or 4% with an $81M jump in revenue in capital market activities offsetting $53M declines in corporate and investment banking ($2M decline in other activities).

Unfortunately the $60M rise in non-interest expenses (22%) resulted in large negative jaws for the period and a large deterioration in this segment’s Efficiency Ratio to 48.6% from 41.5% in the year-ago period.

Loan growth of $6B or 22% compares to deposit growth of $3B or 23%.

PCL rose $3M or 50% to $9M due to higher losses in its U.S. real estate finance portfolio. While the dollar amount is small, the growth in percentage terms is significant and I hope this is not the beginning of a trend.

Net Income declined $12M or 4% to $270M.

Not a bad set of numbers given the inherent volatility associated with corp and i-banking activities present in this segment.

CORPORATE & OTHER

Apart from providing a very small peek at how the Bank’s investments in CIBC FirstCaribbean and the CIBC Mellon joint venture did over the most recent period (in addition to lumping other items in this segment), I don’t really focus much attention here. Revenue declined $19M or 22%, non-interest expenses rose $7M or 2%, PCL was up $3M YoY…overall result was a slight improvement in Net Loss to $68M from $71M in the year ago period.

In conclusion I think the Bank turned in a good set of numbers. Its core Retail and Business Banking segment continues to perform well and I am looking for further growth in Wealth Management (maybe more asset manager M&A going forward?). Wholesale Banking will continue to be a “wild card”.