U.S. mishaps leave CIBC with $1.1B loss

CIBC 3-month chart

Caught in U.S. credit-market chaos, Canadian Imperial Bank of Commerce is reporting a second-quarter loss of $1.1 billion, compared with a profit of $807 million a year earlier.

The biggest hit was a loss of $2.48 billion — or $1.67 billion after tax — on what it called structured credit run-off activities.

Canadian bank earnings Bank Q2 2008 Q2 2007 Change BMO $642 million $671 million -3% Scotiabank $980 million $1.04 billion -6% CIBC ($1.11 billion) $807 million -237% National Bank $185 million $233 million -29% Royal Bank $928 million $1.28 billion -27% TD Bank $852 million $879 million -3% TOTAL $2.477 billion $4.910 billion -49.6%

The bank said Thursday the category includes such things as mark-to-market losses on unhedged exposures related to the U.S. residential mortgage market, charges on credit protection purchased from financial guarantors, losses on sales of certain positions and expenses related to managing the clean-up.

These and other negatives — including $50 million worth of "valuation charges against credit exposures to our derivatives from counterparties other than financial guarantors" — cancelled out profits from areas such as retail banking, producing the quarterly loss.

"The deterioration in credit and liquidity conditions, particularly for securities with exposure to the U.S. residential mortgage market, has required CIBC to record asset writedowns and counterparty credit reserves within its structured credit business," a CIBC statement said.

"In addition, market conditions have had a negative impact on performance in other areas, particularly within CIBC's wholesale and retail brokerage operations."

But all is not lost, CEO Gerald McCaughey said in the statement.

"While the current environment is challenging, CIBC's franchise remains solid. Our capital position is strong and our core businesses are well-positioned for growth. In support of our strategy of consistent and sustainable performance, we are taking further steps to adapt our business profile and risk management processes to evolving financial market risks."

The loss for the three months to April 30 came to $3 a share, compared with a profit of $2.27 a share a year earlier.

Shares of CIBC fell $1.39 to close at $69.46 in TSX trading Thursday.

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