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Canadian Imperial Bank of Commerce (CM)

Q3 2012 Earnings Call

August 30, 2012 08:30 AM ET


Geoff Weiss - VP, IR

Richard Nesbitt - SEVP, CIBC, and Group Head, Wholesale, International, and Technology and Operations

Brian McDonough - EVP, Wholesale Credit and Investment Risk Management

Kevin Glass - SEVP, CIBC and CFO

Tom Woods - SEVP and CRO, Risk Management, CIBC

Gerald McCaughey - President and CEO

Raza Hasan - SVP, Retail Lending and Wealth

David Williamson - SEVP, CIBC, and Group Head, Retail and Business Banking

Victor Dodig - SEVP, CIBC, and Group Head, Wealth Management


Steve Theriault - Bank of America Merrill Lynch

Michael Goldberg - Desjardins Securities

Darko Mihelic - Cormark Securities

John Aiken - Barclays Capital

Gabriel Dechaine - Credit Suisse

Peter Routledge - National Bank Financial

Robert Sedran - CIBC

John Reucassel - BMO Capital Markets



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Good morning ladies and gentlemen, welcome to the CIBC quarterly results conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Geoff Weiss. Please go ahead.

Geoff Weiss

Good morning and thank you for joining us. This morning CIBC senior executives will review CIBC’s Q3 results that were released earlier this morning. The documents referenced on this call, including CIBC’s Q3 news release, investor presentation, and financial supplement, as well as CIBC’s Q3 reports to shareholders can all be found on our website at In addition, an archive of this audio webcast will be available on our website later today.

This morning’s agenda will include opening remarks from Gerry McCaughey, CIBC’s President and Chief Executive Officer. Kevin Glass, our Chief Financial Officer, will follow with a financial review and Tom Woods, our Chief Risk Officer will close the formal remarks with a risk management update. After the presentations, there will be a question-and-answer period that will conclude by 9.30 AM. Also with us for the question-and-answer period are CIBC’s business leaders, Victor Dodig, Richard Nesbitt and David Williamson, as well as other senior officers.

Before we begin let me remind you that any individual speaking on behalf of CIBC on today’s call, may make forward-looking statements that are subject to a variety of risks and uncertainties. These statements may include material factors or assumptions that could cause CIBC’s actual results in future periods to differ materially. For more information, please refer to the note about our forward-looking statements in today’s press release. With that, let me now turn the meeting over to Gerry.

Gerald McCaughey

Thank you, Geoff and good morning everyone. Before I begin, I will also remind you that my comments may contain forward-looking statements. CIBC produced strong results in Q3. We reported net income for the quarter of $841 million and earnings per share of $2. Return on equity for the quarter was 21.8%. Adjusting for items of note, earnings were $2.06. Our capital ratios are strong. We finished the quarter with the Basel III pro forma common equity ratio estimated at 8.9% and a Basel II tier one ratio of 14.1%.

We continue to make progress on our strategy, which has three underlying elements. Our first principle is to be a lower risk bank. We remain focused on delivering consistent and sustainable earnings and we have a strategic plan to deliver managed growth for CIBC. This growth plan is grounded in four main work streams. First we will strengthen our core Canadian Retail and Business Banking franchise with a particular focus on deeper client relationships. Second, we will grow our Wealth Management platform in Canada and internationally, particularly in the United States. This involves limited M&A activity such as our investment in American Century last year and our recent acquisition of McLean Budden’s Canadian Private Wealth business. Third we will grow our client based Wholesale Banking business in targeted industries within our defined risk appetite. These will involve crossing borders in four key areas of expertise, oil and gas, mining, real estate finance and infrastructure. Today’s announcement regarding our acquisition of Griffis & Small, which I’ll touch on shortly is an example of supporting this strategy. And fourth, we will strengthen our offshore Caribbean Banking business.

This plan balances our lower risk approach with sustainable strategic growth and does not include large and transformational acquisitions.

This morning’s announced capital actions are consistent with our strategic plans. Today, we declared a $0.04 increase in our quarterly common dividend. This increase leaves us within our pay out range of 40 to 50%. We also announced our intention to commence a normal course issuer bid to repurchase up to 8.1 million common shares or approximately 2% of shares outstanding.

And lastly, we announced our plans to redeem 300 million of Series 18 preferred shares at the end of Q4.

I will now review the financial results and strategic developments for each of our business. Retail and Business Banking reported net income of 594 million for the third quarter of 2012, up 8% from Q3 of last year. Revenue for the quarter was 2.1 billion, up 2% from a year ago. Credit quality in our retail portfolios continues to be stable. Provisions for credit losses were relatively flat year over year. Operating leverage remained positive despite a planned increase in investment initiatives that support our client focus.

Our strategy in Retail and Business Banking is focused on enhancing the client experience and accelerating profitable revenue growth. Supporting these objectives are three main priorities; building deeper relationships with our clients, enhancing our sales and service capabilities and acquiring and retaining clients consistent with our objectives. Deeper relationships are foundational to what we are trying to achieve. In April we launched the total banking rebate offer, which provides discounted fees for clients who hold four or more products with CIBC.

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