BMO: First Look December 2, 2021 | 07:41 ET | 07:41 ET~ CIBC CM-TSX CM-NYSE Rating Outperform Price: Dec-1 $141.26 Target $165.00 Total Rtn 21%
First Look at Q4/21 Results Bottom Line: Mixed. CM's adjusted cash EPS of $3.37 (excl. ~$0.27 in restructuring, integration, and legal provisions) beat our expectation of $3.23, but missed consensus of $3.54. The beat to us reflected lower credit and better revenue growth (all operating segments above expectation except CPSB).
Total bank PCLs of 7bps (Stages 1&2: (3)bps; Stage 3: 10bps) bettered our 9bps. CET1 ratio of 12.4%/LCR ratio of 127%; 10% dividend increase (nearly double our expectation) and ~2%
NCIB announced. Key Points • Capital Return Increases Met Our Expectations. CM announced a ~2% NCIB, meeting our expectation. Dividend was raised by $0.15 (+10% q/q) to $1.61/common share. This exceeded our expectation of $1.55 (+6% q/q) and represents a ~48% payout ratio (LT avg. of 45%).
• PTPP income up ~7% y/y with revenue diversification helping top-line growth of ~10% y/y; with this "air cover" the bank looks to have accelerated some investments as per previous guidance resulting in (2.6)% operating leverage. Market sensitive fees remained strong, partly offset by lower trading (down 8% y/y from Q4/20; trailing 8-quarter average of $421MM). Total bank non-trading NIM was 243bps (down 2bps q/q and down 5bps from last year); NIX ratio of 58.2% vs. 56.8% a year ago.
• Most Major Operating Segments Exceeded Our Expectations in the quarter with Canadian Commercial & Wealth demonstrating strong momentum, up 30% y/y, helped by noteworthy increases to commercial balances (loan balances up 14% y/ y; deposit balances up 12% y/y) and non-interest income (up 21% y/y). Canadian Personal and Small Business Banking fell short of our expectations due to NIM compression and higher compensation expenses, while being partly offset by loan (up 12% y/y) and deposit increases (up 6% y/y).
• Solid ROE Despite Strong Capital Levels. ROE of 14.9% was driven by strong ROA (73bps), notwithstanding higher capital levels. CET1 ratio of 12.4% was up 10bps q/q with total RWAs up 1% sequentially on ~4% higher average overall loans & BAs q/q; RWA density was 32.6% vs. 33.3% last quarter and 32.7% last year. LCR was 127%, up q/q but down y/y (five-year average of 129%). • Credit Provisioning Moderating. The quarter included total PCLs of $78MM/7bps, up from $(99)MM/(9)bps last quarter. Total allowances (specifics + collectives) now stand at $3.0B or ~128bps of credit RWA (vs. "through-the-cycle" average of 154bps).