Analyst Note| Eric Compton, CFA |
Narrow-moat-rated Canadian Imperial Bank of Commerce, or CIBC, reported decent fiscal second-quarter earnings. Adjusted earnings per share were CAD 1.77, fairly close to the CapIQ consensus of CAD 1.71 and representing a year-over-year decline of 1%. The bank recorded a credit loss provision of CAD 303 million, which was the key reason for the decline in year-over-year earnings, as pre-provision net revenue was actually up 4%. While some peers were still seeing low provisioning costs and even provisioning benefits in some cases, CIBC’s acquisition of the Costco card portfolio and some negative tweaks to its economic outlook helped drive provisioning higher in the quarter. We are at a point where we should see provisioning begin to normalize higher for the industry. We’ll note that this level of provisioning is simply a return to normal after a year of exceptionally low provisioning.