CIBC announces second quarter 2002 results
TORONTO, May 21 /CNW/ -
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Second Quarter 2002 Financial Highlights:
- Reported Earnings were $235 million, or $0.53 per share, diluted,
compared to $355 million, or $0.87 per share diluted, the previous
quarter, and $469 million, or $1.15 per share, diluted, for the same
period a year ago.
- Adjusted Earnings (which exclude unusual items) were $276 million, or
$0.64 per share, diluted, compared to $386 million, or $0.95 per share
diluted, the previous quarter, and $439 million, or $1.07 per share,
diluted, for the same period a year ago.
- Operating Earnings (which exclude unusual items and the net impact of
Amicus) were $340 million, or $0.81 per share, diluted, compared to
$453 million, or $1.13 per share diluted, the previous quarter, and
$503 million, or $1.23 per share, diluted, for the same period a
year ago.
- Return on Equity was 8.3% (Reported); 10.0% (Adjusted); and 12.7%
(Operating).
- Tier 1 Capital Ratio was 8.9% and total capital ratio was 12.1%.
- Loan Loss Provisions were $390 million for the second quarter, down
from $540 million in the prior quarter. Based on anticipated future
trends, the total loan loss provision for fiscal 2002 is expected to
be in the range of $1.45 billion to $1.50 billion, as announced on
May 2, 2002.
- Total Allowance for Credit Losses remained strong, exceeding gross
impaired loans by $322 million.
- Net Unrealized Gains on CIBC's investment portfolio stood at
$729 million.
- Proactive Balance Sheet Management: Repurchased 4.7 million common
shares during the quarter.
(Operating Earnings and Adjusted Earnings exclude items that management
believes are unusual or relate to substantial strategic investments,
thereby allowing analysis of business trends and the performance of
CIBC's business lines. These measures do not have a standardized meaning
under GAAP and may not be comparable to similar measures used by other
companies. Refer to Management's Discussion and Analysis, Consolidated
Overview section, for further explanation).
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CIBC announced second quarter Reported Earnings of $235 million, or $0.53
per share, diluted, compared to $355 million, or $0.87 per share, diluted, the
previous quarter and $469 million, or $1.15 per share, diluted, from the same
period a year ago. Adjusted Earnings (which exclude unusual items) were $276
million, or $0.64 per share, diluted, compared to $386 million, or $0.95 per
share, diluted, the previous quarter and $439 million, or $1.07 per share,
diluted, from the same period a year ago. Operating Earnings (which exclude
unusual items and the net impact of Amicus) were $340 million, or $0.81 per
share, diluted, compared to $453 million, or $1.13 per share, diluted, the
previous quarter, and $503 million, or $1.23 per share, diluted, in the second
quarter of 2001.
"Our second quarter earnings were affected by weakness in capital
markets, corporate loan loss provisions and lower merchant banking net
revenue," said John S. Hunkin, Chairman and Chief Executive Officer. "The
solid performance of our retail businesses helped offset the weakness in
wholesale markets. These businesses, comprising Retail Products, Retail
Markets and Wealth Management, continued to deliver strong returns on equity
with consumer deposits, mortgages and personal lending recording strong
quarter over quarter growth."
During the quarter, CIBC continued to make progress on its commitment to
shift more of its business mix in favour of retail. The implementation of a
new technology platform in the retail branch network progressed on schedule.
Market acceptance of the new CIBC / American Express entourage cards remained
strong, and CIBC is optimistic regarding the prospects for the newly launched
CIBC Shoppers Optimum VISA card. CIBC also remains on track to successfully
integrate the retail brokerage and asset management businesses of Merrill
Lynch into the CIBC organization.
In addition to focusing on growth, CIBC addressed ongoing credit quality
deterioration and weakness in the capital markets. Actions included taking a
charge of approximately $90 million on CIBC's approximate $100 million net
exposure to Teleglobe Inc.; eliminating more than 100 positions in CIBC World
Markets, primarily in the U.S.; and, taking writedowns in the merchant banking
portfolio. The reductions in the carrying value of the merchant banking
investments were more than offset by closing out the remaining hedge contracts
in respect of CIBC's Global Crossing shares.
"The need for these actions reflects the continuing challenges CIBC, and
other North American banks, are facing in an economy that is still recovering
from the slowdown in 2001," said Hunkin. "Our capital markets franchise
remains strong, but after improving in the first quarter, business activity
returned to levels experienced in the fourth quarter of 2001."
Outlook
"While there is evidence of strengthening of the North American economy,
we are still facing the adverse credit market conditions created by the recent
downturn. We also continue to experience weak capital market conditions, which
may well persist through the balance of this year," said Hunkin. "As a result,
we are taking action across our businesses to protect our earnings in the
short-term, and to enhance our growth prospects in the mid- to long-term."
Actions include:
- Taking an aggressive approach to managing controllable expenses and
deferring all non-essential spending;
- Continuing to focus on capital management and directing resources to
our high-growth, retail-oriented businesses;
- Delivering excellence in product innovation, program execution and
customer service.
"In addition, we will be taking steps to further reduce risk and earnings
volatility in our wholesale banking business. We will continue to reduce the
size of our corporate loan portfolio to mitigate the impact of the credit
cycle on our future earnings. And, we will reduce the size of our Merchant
Banking portfolio. These actions will also help CIBC achieve its objective of
directing a greater proportion of capital to our retail financial services
businesses.
"Despite the current challenging conditions in the wholesale markets,
CIBC's prospects are excellent," added Hunkin. "Our wholesale franchise
remains strong and our integrated client service strategy continues to be very
successful. We have made tremendous progress in our retail and wealth
management businesses, as evidenced by organic market share gains as well as
the successful integration of the businesses we have acquired."
"As the economy and markets strengthen, CIBC is well positioned. Great
people make the difference at CIBC - and our people are committed as ever in
meeting our customers' needs, providing support internally to our front-line
business people and supporting many initiatives in their local communities."
2002 Second Quarter Highlights
Retail Products
- Continuing to build market share in mortgages: Bolstered by the
strong real estate market and innovative product development, market
share of purchase volumes in residential mortgages increased to
13.6%, up from 13.3% the previous quarter.
- Strong contribution by cards: CIBC continued to be No. 1 in card
purchase volumes with a market share of 32.3%, up from 32.1% the
previous quarter. Market share of card balances outstanding remained
strong at 21.7%.
- Product Innovation: After introducing the new entourage cards in the
first quarter through a joint marketing agreement with American
Express Limited, CIBC teamed with Shoppers Drug Mart Inc. to launch
the new CIBC Shoppers Optimum VISA credit card in the second
quarter.
- Building Retail Asset Balances: CIBC continues to focus on building
retail assets; outstanding balances exhibited a positive trend,
growing to more than $96 billion at quarter end.
Retail Markets
- Introducing a stronger sales culture. New technologies and sales
management tools were introduced to support sales growth objectives.
- Rolling out Smart, Simple Solutions: Demand for CIBC's new deposit
accounts continued to be strong, supporting the bank's strategy of
providing customers with fewer but more targeted products with clear
and distinctive value propositions.
- Increased productivity and sales efficiency: During the quarter,
more than 5,000 new or upgraded workstations were installed in 330
branches as part of an ongoing technology upgrade to allow employees
to provide customers with faster access to account information. At
quarter end, 71% of the full infrastructure rollout was complete
with upgrades at 400 remaining branches scheduled for completion
during the third quarter.
Wealth Management
- CIBC Wood Gundy continued to focus on integrating its retail
brokerage services and growing its fee-based assets following the
purchase last quarter of Merrill Lynch Canada Inc.'s retail
brokerage business. Fee-based assets grew by 135% fiscal year-to-
date and by 51% excluding acquisitions. CIBC Wood Gundy also
introduced the CIBC Aerogold VISA card as a new feature to its
popular Asset Advantage Account.
- The former Merrill Lynch Mutual Funds, now managed by CM Investment
Management Inc., were renamed Renaissance Mutual Funds. The fund
family consists of 29 funds offering broad diversification across
asset classes, management styles and geographic regions. In addition
to the Renaissance Mutual Funds, CM Investment Management is the
manager of nine Frontiers Pools and a separately managed account
program.
- CIBC Imperial Service continued to gain competitive advantage in
Canadian retail banking by licensing its branch-based financial
advisers with the Investment Dealers Association of Canada. At
quarter end, more than 600 financial advisers were licensed to
advise on and sell third party and CIBC investment products in
addition to the complete range of day-to-day banking solutions.
- CIBC Wealth Management continued to build momentum with its managed
investment services: CIBC Personal Portfolio Services (PPS) and its
new CIBC Managed Portfolio Services (MPS). Since its launch on
February 1, 2002, MPS recorded total net sales of $269 million
through the end of the second quarter.
- CIBC Oppenheimer Asset Management completed a $90 million initial
public offering for Advantage Advisers Multi-Sector Fund I, a multi-
sector hedged-equity fund.
CIBC World Markets
Despite continuing weak economic conditions outside of Canada, CIBC World
Markets recorded a number of notable achievements during the quarter
including:
- Acting as co-lead manager and collateral distributor in a commercial
real estate securitization offering of US$790 million;
- Acting as financial advisor to Alberta Energy Company Ltd. regarding
its merger with PanCanadian Energy Corp. to form EnCana Corp.;
- Acting as financial advisor to Westcoast Energy Inc. with regard to
its divestiture of Centra Gas BC;
- Completing a leveraged lease transaction on 118 passenger railcars
for the San Francisco Municipal Railway for total equipment value of
US$388 million.
Although CIBC World Markets has taken steps to eliminate more than 100
positions to address ongoing market conditions, staffing increases were made
in strategic growth areas, including the addition of a team of experienced
professionals in Consumer Growth Investment Banking in the U.S. This reflects
CIBC World Markets' strategy to provide comprehensive investment banking
services to premier growth companies in a focused range of sectors.
Amicus
During the quarter, CIBC continued to expand Amicus, its co-branded
retail electronic banking business, in both Canada and the U.S., including:
- Customer acquisition: The number of registered customers increased
7.0% during the quarter, bringing the total number of customers to
1,073,000.
- Number of Pavilions: The number of pavilions operating in Canada and
the U.S. increased to 507, up from 481 at the end of the first
quarter.
- Funds under management: Loans and deposits under management grew
11.5% in Canada through President's Choice Financial during the
quarter, and increased 42% in the U.S.
- Deposit growth: Deposits in Canada through President's Choice
Financial grew to $2.9 billion, up from $2.7 billion the previous
quarter.
CIBC continued to have discussions with parties in the U.S. that are
strategically well-placed to help with its U.S. expansion.
Performance Against Objectives
CIBC remains focused on delivering against the three year performance
targets it established at the beginning of fiscal 1999. Since November 1,
1999, CIBC has delivered a total shareholder return of 85.8%. Operating ROE
for the first six months of the year was 15.0%, while Tier 1 and total capital
ratios remained strong at 8.9% and 12.1% respectively. |
