Saturday, September 23, 2006

CIBC to Add 70 Branches

The Toronto Star, Tara Perkins, 23 September 2006

New immigrants in the Greater Toronto Area will be a key target market for the Canadian Imperial Bank of Commerce as it opens or expands 70 branches across the country in the next five years.

"Although we have the second-largest number of branches in the Greater Toronto Area, it is still the area of greatest opportunity, given its large and growing proportion of new immigrants and economic wealth," said Sonia Baxendale, senior executive vice-president of CIBC Retail Markets.

CIBC already has about 220 branches in the Greater Toronto Area.

Forty of the 70 new or improved branches will be in Ontario, and all will be in high-growth, high-potential markets, Baxendale told analysts during a conference call yesterday.

The bank is also investing in Alberta, where high economic-growth rates are expected to continue; and in British Columbia, which has high immigration and a growing retiree population, Baxendale said.

Each of those provinces will have 11 new branches.

CIBC, Canada's fifth-biggest bank by assets, had 1,057 branches across Canada as of July 31, plus 235 President's Choice Financial pavilions. The bank has the second-largest branch network in Canada, with about 36,700 employees.

The bank plans to focus on two growth areas as it beefs up its network: the aging population and increasing immigration, according to yesterday's presentation.

Numerous big banks have placed an emphasis on new immigrants lately.

Last week, Royal Bank of Canada chief executive officer Gordon Nixon played host to dozens of journalists from the Chinese and South Asian media to outline the bank's strategy to attract business from new Canadians.

Last month, BMO Financial Group announced it was buying Bcpbank Canada, the Canadian arm of Portugal's Millenium Bcp, saying the chance to provide multicultural financial services is "one of the biggest business opportunities" out there.

Baxendale said telephone banking is one of CIBC's strengths, and the bank is adding additional language capabilities to its lines.

Other measures CIBC is taking to improve its core retail operations include adding small-business advisers to branches and investing in the bank's credit-card portfolio, which is the largest in the country.

The bank will increase credit-card limits for existing clients, boost credit-card advertising and provide incentives for customers to increase their spending, Baxendale said.

Over the past year, CIBC had been decreasing the amount of risk taken on after being walloped by a $2.8 billion charge to settle a class-action lawsuit related to the bank's dealings with Enron Corp. CIBC has been shifting away from unsecured loans toward secured lending.

The bank's risk posture has affected short-term revenue growth, CIBC chief executive Gerry McCaughey acknowledged. But he said that the change will position CIBC for stable long-term performance.

Revenues dropped to $2.8 billion in the most recent quarter, from $3.2 billion a year earlier.

McCaughey said CIBC is sticking to its goal of achieving at least 10 per cent earnings per share growth over the medium term. Dividends have room to grow, he added, because the bank is at the low end of a target payout range of 40 to 50 per cent of profit.

McCaughey also said CIBC would be willing to make further investments in the Caribbean if the right opportunity came up.
Bloomberg, Doug Alexander, 22 September 2006

Canadian Imperial Bank of Commerce, the country's fifth-largest bank by assets, plans to open or expand 70 branches over the next five years to revive sluggish revenue growth at its consumer lending unit.

The new or relocated branches include 40 in Ontario and 11 each in Alberta and British Columbia, Sonia Baxendale, senior executive vice-president of CIBC Retail Markets, told analysts on a conference call today.

Toronto ``is still the area of greatest opportunity given its large and growing population of new immigrants and economic wealth,'' Baxendale said. ``Investment in branches in these high-growth markets will be a priority in the years ahead.''

Canadian Imperial, which says it has the second-largest branch network in the country, is trying to boost revenue from its consumer bank, which has been little changed at about C$2 billion ($1.8 billion) each quarter for at least two years.

The branch additions represent a pace of about 14 a year, compared with five that opened this year. Canadian Imperial had 1,057 branches in Canada as of July 31.

Profit from consumer banking and asset management has risen at an average rate of 12 percent a year over the past three years, said Chief Financial Officer Tom Woods. The bank has increased revenue in recent quarters from mortgages, while growth has slowed in small business lending and credit cards.

The bank plans to add more advisers for small businesses in its branches and introduce a new credit card this year, Baxendale said.

Chief Executive Officer Gerald McCaughey reiterated his target of "10 percent plus" growth in earnings per share and said there's room to increase dividends. The bank has targeted dividend payouts of between 40 percent and 50 percent of profit.

"We are at the very low end of the range that we've set," McCaughey said. ``When we're at the low end and the earnings profile has improved, there is opportunity for the distributions to increase.''

Canadian Imperial may also be willing to make more acquisitions in the Caribbean through FirstCaribbean International ``if the right opportunity came up,'' McCaughey said. Canadian Imperial agreed to take control of the bank by buying a stake from Barclays Plc for $1.08 billion. The transaction is expected to close by the end of the year.

FirstCaribbean Chief Executive Officer Charles Pink, who also spoke today at the conference, said he's looking to buy banks in the Caribbean in markets it doesn't serve if the price is right.

"We are very, very clear that we won't overpay," Pink said. "If we can't make the numbers work, we will not acquire."

Shares of Canadian Imperial fell 23 cents to C$84.10 at 4:10 p.m. on the Toronto Stock Exchange. The stock has gained 10 percent this year, the best performer among Canada's six biggest banks.