Canadian Imperial Bank of Commerce senior executives reviewed its third quarter results. The conference call began with opening remarks from Gerry McCaughey, CIBC?s President and CEO. He stated that the CIBC produced strong results in the third quarter. It has a net income of $841 million and earnings per share of $2.
CIBC got 21.8 percent return on equity for the third quarter. After adjustments, its earnings were $2.06. The bank?s capital ratios are also strong according to the CEO. They got 8.9 percent with the Basel III pro forma common equity ratio and 14.1 percent Basel II tier one ratio.
To sustain its good run, the CIBC has a strategy with three elements. It wants to be a lower risk bank. It will try to focus on delivering consistent and sustainable earnings. It will also plan to deliver managed growth.
To do so, it will strengthen its core Canadian Retail and Business Banking franchise with a focus on deeper client relationships. It also wants to grow its Wealth Management platform in Canada and overseas, especially in the United States. Lastly, it wants to grow its client based Wholesale Banking business in specific industries within its defined risk appetite. The strategies will involve crossing borders in four important areas of expertise, which are mining, oil and gas, real estate finance, and infrastructure.
The CIBC acquired Griffis and Small, which is an example of how the bank will attempt to reach its goals. It also planned to strengthen its offshore Caribbean Banking business. This will balance its plans to lower risk approach with sustainable strategic growth. It will not include large acquisitions.
The CIBC CEO also announced that the bank plans to redeem 300 million of Series 18 preferred shares by the end of the fourth quarter. The bank declared a $0.04 increase in its quarterly dividend that leaves the bank within its payout range of 40 to 50 percent.
Loans at banks in the United States increased in the second quarter after dropping in the early parts of the year. Revenue dropped due to the multibillion dollar trading loss at JP Morgan Chase. The increase in lending is a positive sign for the nation?s economy.
But some analysts doubt whether it will continue as they worry about Europe?s debt crisis as well as the cuts in federal spending and tax increases after this year?s presidential election. Some say they will wait and determine whether the trend of increased lending is sustained.
Banks? outstanding loan balances increased 1.4 percent from the previous quarter to $7.5 trillion. This is according to the quarterly report released by the Federal Deposit Insurance Corp. It was the fourth gain in the last five quarters and reversed the decline in the first quarter of 2012.
The largest gain was experienced by commercial loans, which grew by 3.6 percent on a quarterly basis. It was followed by credit card balances, which increased by 2.3 percent. Home loans got a 0.9 percent quarterly increase while real-estate construction loans dropped by 4.8 percent.
Banks boosted their lending but the trend may not continue. Some economists said that they are worried about businesses that are beginning to lose confidence. They are hesitant to take on new loans. Another factor for the industry is that banks make less money on interest as higher-yielding loans are repaid and replaced by lower-yielding loans.
The quarterly results were dragged down by ta $4.7 billion decline in trading income. It was due to JP Morgan?s massive trading loss, which was linked to a London trader named the Whale and amounted to $5.8 billion by the end of second quarter. It could reach up to $7 billion. A spokesman from JP Morgan declined to comment on the issue.
Source: http://www.paydayloansmag.com/reviewing-the-work-of-us-and-canadian-banks-for-second-quarter/
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