CIBC beats as bad loan provisions come in lower than expected

financialpost.com:

Canadian Imperial Bank of Commerce topped analysts’ earnings estimates as the lender reported loan-loss provisions that came in below forecasts.

CIBC earned $1.57 per share on an adjusted basis in the fiscal fourth quarter, it said in a statement Thursday, beating the $1.53 average estimate of analysts in a Bloomberg survey.

The Toronto-based bank set aside $541 million in provisions for credit losses, less than the $559.9 million forecast by analysts. Provisions for losses on impaired loans climbed $259 million. CIBC’s earnings have previously been dented by a surge in impairments in the bank’s U.S. office loan portfolio.

CIBC’s stock performance tends to be closely correlated to the broader outlook for the Canadian housing market, according to analysts. That’s because the Toronto-based lender has a larger proportion of its domestic loan book in residential mortgages than its peers do. The bank’s shares have slipped 2.6 per cent this year, less than the 6.4 per cent decline for the S&P/TSX Commercial Banks Index.

The outlook for housing has been gloomy, as the highest interest rates in decades have put pressure on borrowers, contributing to a recent increase in homes for sale and lower benchmark housing prices. Economists with Toronto-Dominion Bank said last week that average home prices are likely to decline by as much as 10 per cent in the first quarter of next year.

Bank of Nova Scotia, the first of the Canadian banks to report fourth-quarter results, missed estimates earlier this week after setting aside $1.26 billion for potentially soured loans, far exceeding analysts’ estimates of $870 million.

Bloomberg.com