Scotia Capital, 2 December 2011
• CM reported operating EPS of $1.87 (excl. a $0.12 merchant banking gain and other charges of $0.08). Earnings were strong, in line with our expectations of $1.90, however, handily above consensus EPS of $1.81.
• Operating ROE: 20.4%, RRWA: 2.71%, CET1: 8.1%
Implications
• Earnings were driven by strong results from Retail & Business Banking and Wealth Management up 15% and 20% y/y, respectively. Wholesale Banking earnings were resilient at $156M versus $160M in the previous quarter and a very weak $67M a year earlier. Trading revenue was solid at $165M versus $146M in Q3/11 and $157M a year earlier.
• CM has positive earnings momentum in 2012 from expected 1.8% reduction in statutory tax rate, $0.15 earnings accretion from American Century and $0.09 per share run rate accretion from preferred share redemptions and $0.20 accounting pickup from IFRS.
Recommendation
• We are increasing our 2012E and 2013E EPS both by $0.20 to $8.10 and $8.80, respectively due to IFRS and expected stronger operating results. We reiterate 1-SO due to CM's high relative profitability, low relative valuation and low risk balance sheet and business mix.
;
• CM reported operating EPS of $1.87 (excl. a $0.12 merchant banking gain and other charges of $0.08). Earnings were strong, in line with our expectations of $1.90, however, handily above consensus EPS of $1.81.
• Operating ROE: 20.4%, RRWA: 2.71%, CET1: 8.1%
Implications
• Earnings were driven by strong results from Retail & Business Banking and Wealth Management up 15% and 20% y/y, respectively. Wholesale Banking earnings were resilient at $156M versus $160M in the previous quarter and a very weak $67M a year earlier. Trading revenue was solid at $165M versus $146M in Q3/11 and $157M a year earlier.
• CM has positive earnings momentum in 2012 from expected 1.8% reduction in statutory tax rate, $0.15 earnings accretion from American Century and $0.09 per share run rate accretion from preferred share redemptions and $0.20 accounting pickup from IFRS.
Recommendation
• We are increasing our 2012E and 2013E EPS both by $0.20 to $8.10 and $8.80, respectively due to IFRS and expected stronger operating results. We reiterate 1-SO due to CM's high relative profitability, low relative valuation and low risk balance sheet and business mix.
