Investors who are willing to overlook the staggering amount of money that the Canadian Imperial Bank of Commerce (CIBC) set aside for bad loans will be able to find a silver lining in the bank’s third quarter results, according to one analyst.
The bank set aside $736 million for possible loan losses, up from $243 the year prior, and its profit fell more than 10 per cent on an annual basis. “The spike in provisions will garner the lion’s share of attention but, if one is willing to look past the increase of reserves on performing loans, CIBC carved out an impressive quarter,” John Aiken, head of research at Barclays, wrote in a note to clients on Thursday.
CIBC’s underlying operations demonstrated higher margins, generally improving efficiency and domestic loan growth, he wrote. While impaired provisions were higher than anticipated, the bulk came from provisions on performing loans and were influenced by changes in the bank’s economic outlook. The gross impaired loans are being attributed to the bank’s commercial real estate exposure, he added.
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