BMOFebruary 25, 2022 | 07:47 ET~ CIBC CM-TSX CM-NYSE Rating Outperform Price: Feb-24 $154.90 Target $165.00 Total Rtn 10%
First Look at Q1/22 Results Bottom Line: Positive. CM's adjusted cash EPS of $4.08 (excl. $0.02 integration charge for Costco portfolio) exceeded our/consensus expectations of $3.62/$3.67. The beat to us reflected better capital markets activity (strong FX/Equity tradings) and better credit in CP&SB.
Total bank PCL ratio was 6bps. Balance sheet remains strong with CET1 ratio of 12.2%. CM repurchased ~0.9MM shares in the quarter (~9% of 10MM/2% NCIB previously announced). Two-for-one stock split announced, subject to approval.
Key Points • PTPP income was up 11% y/y with top-line revenue growth of ~11% y/y (doubledigit growth in net interest income and trading); total bank adjusted operating leverage +0.3% reflecting previously articulated investment plans which resulted in 10% higher expensesy/y). Adj. NIX was 54.2 vs. 54.3% in Q1/21.
Trading revenue was better than our expectations (up 13% y/y to $576MM; trailing 8-quarter average of $418MM). Total bank non-trading NIM was down 6bps y/y (down 2bps q/q to 241bps).
• Most Major Operating Segments Exceeded Our Expectations in the quarter with Canadian Commercial and Wealth continuing to show growth, up 31% y/y with strong volume growth (commercial loan balances up 19% y/y; deposit balances up 12% y/y) and AUA growth (up 14% y/y) driven by market appreciation. CP&SB was up 7% y/y, helped by noteworthy increases to transactional fees driven by higher consumer activity and volume growth (loan balances up 12% y/y; NIM down 10bps y/y).
Capital Markets comfortably exceeded our expectations, up 10% y/y driven by increased equities and FX trading, as well as higher corporate banking utilization. • Strong Loan Growth. CM delivered double-digit growth in net interest income, supported by a ~14% y/y loan growth, notwithstanding lower NIM; spread-based revenue makes up 51.9% of total revenues, unchanged from last year.
• Another Quarter of Reserve Release Benefits. The quarter included $75MM/6bps in PCLs (Stage 1&2: (4)bps; Stage 3: 11bps). Total allowances (specifics + collectives) now stand at ~$3.0B or ~121bps of credit RWA (vs. "through the cycle" average of 154bps).
• Strong ROE Despite Higher Capital Levels. Adjusted ROE of 17.6% for the quarter was driven by strong ROA of 85bps and notwithstanding a CET1 ratio of 12.2% (down 20bps q/q).