© Reuters. FILE PHOTO: The Canadian Imperial Bank of Commerce (CIBC) logo is seen on a building in Toronto, Ontario, Canada September 27, 2021. REUTERS/Chris Helgren/File Photo
(Reuters) -Canadian Imperial Bank of Commerce (CIBC) trounced first-quarter profit estimates on Friday, as growth in the lender’s capital markets division boosted revenue and more than offset a decline in other units.
The Toronto-based lender kicked off the first-quarter earnings season for major Canadian banks. Profit in capital markets jumped 13% to C$612 million ($450.40 million) in the reported quarter and drove an 8% rise in CBIC’s overall revenue to C$5.93 billion.
That helped the bank earn C$1.94 a share on an adjusted basis, comfortably above an estimate of C$1.70, according to data from Refinitiv.
Still, CIBC’s profit took a hit after it set aside C$295 million in provisions for credit losses in the reported quarter, up C$220 million from a year-ago period, as it braces for increased odds of more loan defaults in a rising interest rate environment.
Canada’s central bank over the past 11 months has lifted interest rates at a record pace to 4.5% to tame inflation, which was 6.3% in December, still well above the bank’s 2% target. Last month, the Bank of Canada said it would hold off on further moves to let the effects of past rate hikes sink in.
CIBC’s overall net profit saw a 77% slump to C$432 million ($318 million), or C$0.39 per share, from a year-ago levels.
Rivals Bank of Montreal and Bank of Nova Scotia will report on Tuesday while Royal Bank of Canada and National Bank of Canada (OTC:) will post their earnings on Wednesday.
CIBC’s profit was also dragged lower after the company recorded a pretax charge of C$1.17 billion, representing $855 million of damages and interest through Jan. 31 in connection with a lawsuit tied to the 2008 global financial crisis.
Last week, the Toronto-based company said it would pay $770 million to a vehicle controlled by private-equity firm Cerberus Capital Management to resolve the lawsuit.
The dispute stemmed from a complex 2008 transaction in which CIBC made payments to a Cerberus entity in exchange for a loan to reduce the bank’s exposure to U.S. residential real estate.
($1 = 1.3588 Canadian dollars)