Wednesday, April 04, 2007

DBRS Upgrades CIBC Ratings

Investment Executive, James Langton, 4 April 2007

DBRS has upgraded all its ratings on CIBC and removed the Under Review with Positive Implications status, which was placed on the ratings March 1.

This rating action confirms DBRS’s preliminary view that the bank continues to make progress in raising capital ratios to levels comparable to peers and better managing reputation-related risk, factors that caused rating pressure in 2005. “Sustaining capital ratios will be the result of growth in retained earnings, which also increases the amount of preferred shares allowed to be included in Tier 1 capital, but partially offset strong growth in risk-weighted assets,” it said.

“CIBC has demonstrated its ability to facilitate future expansion without significantly impeding the Tier 1 and tangible capital ratios through the acquisition of and the subsequent share purchase of FirstCaribbean International Bank,” DBRS said.

“Should CIBC resume its share buyback program, the level of capital growth is anticipated to slow in 2007,” it adds. DBRS also anticipates the bank will be able to meet its objective to maintain a Tier 1 capital ratio at or above 8.5%.

DBRS adds that it expects the bank will continue to manage reputation-related issues through ongoing improvements in business practices, corporate governance and compliance.

“The ratings are supported by CIBC’s lower-risk retail business mix and progress in improving its expense ratio, which should contribute to earnings stability and credit quality, therefore better positioning CIBC for future downturns,” it says.