25 February 2011

CIBC Q1 2011 Earnings

Scotia Capital, 25 February 2011

• CIBC (CM) cash operating EPS increased 19% YOY to $1.97, significantly above expectations due to very strong wholesale earnings, higher retail, and lower LLPs. Wholescale earnings were slightly higher than the strong Q1/10 and almost triple Q4/10. Underwriting and advisory fees were up significantly with trading revenue solid.

• Operating ROE: 24.0%, RRWA: 2.89%, Tier 1 Capital: 14.3%.


• The bank indicated that its Basel III Common Equity Tier 1 ratio would be just in excess of the 7% 2019 minimum capital requirements. CM's dividend payout ratio on our 2011E EPS is 45%, versus the target range of 40%-50%.


• We are increasing our 2011E and 2012E EPS to $7.70 and $8.50 from $7.00 and $7.80, respectively, due to recovery in wholesale earnings and improving retail. Our one-year share price target is unchanged at $100.

• We reiterate our 1-Sector Outperform rating due to CM's high profitability (RRWA) and strong operating leverage from the stability in the bank's wholesale and retail operating platform.