Shareholders suing CIBC over bad loan losses
Disgruntled shareholders have launched a multibillion-dollar lawsuit against CIBC over the bank's bad loans in the U.S. subprime mortgage market.
The group alleges that the Canadian Imperial Bank of Commerce failed to disclose the extent that the bank had loans outstanding to companies in the failing part of the U.S. mortgage sector.
"In the particular, CIBC [said] its total exposure … was not a major issue when, in fact, the bank had exposure to billions of dollars of losses," the group said in a news release issued Wednesday.
Three-month CIBC stock chartIn May, the Canadian bank reported a loss of $1.1 billion for the second-quarter of the fiscal year compared with earnings of $807 million for the same period a year earlier. CIBC wrote off $2.48 billion in the quarter in so-called structured credit runoff activities, in effect the failing U.S. subprime mortgage market.
The legal action pegs the subprime write-offs at a higher amount, $3.379 billion.
The lawsuit maintains that CIBC officials knew about the extent of the bank's loans in this risky sector but failed to disclose that fact to shareholders.
CIBC said it acted properly and denies the claims in the legal action.
"We plan to vigorously defend this action," spokesman Rob McLeod said Wednesday.
Shares of CIBC gained $3.17, or more than five per cent, to close at $63.29 on the TSX on Wednesday.
As a result of the write-offs, CIBC stock dropped substantially, reducing the value of the shares for investors.
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