CIBC announced a fourth quarter loss of $100 million, or $(0.40) per share, diluted, compared with $193 million, or $0.41 per share, diluted, the previous quarter and $242 million, or $0.56 per share, diluted, during the same period a year ago. Fourth quarter results included a number of unusual events: an after-tax restructuring charge of $232 million to exit the U.S. electronic banking operations; an additional after-tax charge of $91 million relating to restructuring initiatives in other businesses; and write-downs in certain portfolios to reflect impairments of $248 million after-tax. The fourth quarter results also included an after-tax gain of $190 million related to the combination of CIBC’s Caribbean retail, corporate and international banking operations with those of Barclays Bank PLC.
Earnings for the 12 months ended October 31, 2002, were $653 million, or $1.35 per share, diluted, compared to $1,686 million, or $4.13 per share, diluted, in 2001.
“Clearly, our fourth quarter and full-year results are below our expectations and do not reflect CIBC’s real earnings potential. However, we are buoyed by the strong performance of many of our businesses, particularly our Canadian retail, wealth management and investment banking operations,” said John S. Hunkin, Chairman and Chief Executive Officer. “The continued strength of these businesses, combined with the actions we took during the year to reduce costs and earnings volatility, leaves us well-positioned heading into 2003.”
During the quarter, CIBC’s retail operations again contributed high returns on equity, with cards, mortgages and deposits continuing their strong year-over-year growth pace. The integration of businesses acquired as part of CIBC Wealth Management’s expansion strategy progressed on schedule. In Canada, CIBC’s investment banking operations delivered strong results. Within Amicus, CIBC continued to be pleased with the pace of development of its Canadian electronic banking operations under the President’s Choice Financial brand.
“Overall, our performance in the fourth quarter continued to be affected by a very challenging economic environment in North America,” added Hunkin. “In particular, continued weak capital market activity, declining new origination activity in the U.S., and fewer opportunities for merchant banking asset sales led to earnings erosion in our wholesale business.”
CIBC announced a series of actions during the quarter to address the ongoing market challenges, including:
– Making the decision to close its U.S. electronic banking operations;
– Further downsizing its U.S. corporate and investment banking operations;
– Taking additional write-downs in the merchant banking portfolio and its collateralized debt obligation and high-yield debt portfolios;
– Initiating network optimization and efficiency measures in CIBC Retail Markets.
“These actions, combined with the initiatives we announced in the second quarter to lower capital allocated to our large corporate loan book and decrease the size of our merchant banking portfolio, will help reduce CIBC’s future earnings volatility and risk profile,” said Hunkin. “Heading into 2003, we will be diligent in managing costs; prudent in allocating capital; and, disciplined in pursuing growth — our focus will be on our high return CIBC Retail Markets and CIBC Wealth Management businesses. Through these steps, we are committed to gradually returning our performance to levels that we, and our shareholders, have come to expect.”
2002 Fourth Quarter Highlights
CIBC Retail Markets
– Continuing to build market share in mortgages: Market share in residential mortgages increased to 14.1%, up from 13.8% the previous quarter.
– Strong contribution by cards: Market share of card purchase volumes remained strong at 31.7%, while market share of card balances outstanding was 21.5%, both a strong No. 1 position in Canada.
– Building personal loan balances: Personal loan balances administered for mortgages, loans and cards showed a positive trend, growing to more than $111 billion at quarter end.
– Deposits continue positive trend: Personal transaction deposits grew 1.6% from the previous quarter and 18.5% from the previous year, led primarily by the ongoing success and customer acceptance of The Waive and CIBC Premium Growth Account.
– Investment in training and education: As part of an ongoing initiative to upgrade skills and provide development opportunities within our Canadian retail operations, E-learning was launched during the quarter, allowing employees to take courses online from home or work.
– Making banking more accessible: CIBC Audio Access ABM service was introduced during the quarter as part of plans for improving access to and upgrading CIBC’s extensive network of ABMs across Canada. Audio Access ABMs allow customers with visual impairments and the elderly to plug personal headphones into an audio jack and follow instructions in English or French for completing any ABM transaction using the number keypad.
– Combining operations in the Caribbean: CIBC and Barclays Bank PLC completed the combination of their Caribbean retail, corporate and international banking operations in October. The combined operation — FirstCaribbean International Bank(TM) — now has one of the largest capital bases of any Caribbean bank, giving it the resources necessary to invest in the region and better serve its customers. CIBC retains an approximate 44% equity interest in FirstCaribbean International Bank(TM).
CIBC Wealth Management
– Imperial Service, the branch-based advisory offer for affluent customers, has more than 850 financial advisers licensed to advise on, and sell, a full suite of non-proprietary and proprietary investment products, in addition to delivering day-to-day credit, protection and banking solutions to clients.
– Fee-based investment management programs continued to have positive net sales in the quarter. CIBC Personal Portfolio Services, the discretionary investment management product, recorded $39 million in net sales, maintaining a leadership position in the Canadian mutual fund wrap market for assets under management. CIBC’s All-In-One Fund Solution, CIBC Managed Portfolio Service, which was launched earlier this year, grew 17% to $411 million in assets under management this quarter. Investment Consulting Services, CIBC’s separately managed wrap program distributed through CIBC Wood Gundy, generated $167 million in net sales and maintained its leadership position in the separately managed wrap market at $3.6 billion in assets under management — this represents a 35% market share.
– CIBC led all Canadian banks in mutual fund net sales for the fourth quarter. CIBC was the only Canadian bank to experience positive net sales in mutual funds during the quarter.
– In support of CIBC’s focus to offer clients a broad selection of investment solutions, several new products were introduced this quarter, including the CIBC Escalating Rate GIC and the US$ Managed Portfolios.
CIBC World Markets
– The continuing strength of the Canadian business was evident during the quarter. The National Post ranked CIBC World Markets as the No. 1 M&A franchise in Canada in 2002 both in terms of number and value of deals. CIBC World Markets maintained its year-to-date No. 1 industry ranking with respect to equity financings completed in Canada. Also during the quarter, CIBC World Markets’ research was ranked No. 1 by Canadian fixed income clients for 2002, according to a report released by an independent industry group.
– CIBC World Markets participated in a number of significant transactions during the quarter, including:
– Acting as financial advisor to AT&T Corp. in a transaction involving the sale of a controlling interest in AT&T Canada.
– Providing advisory services and arranging of equity for the financing of passenger rail cars for Southeastern Pennsylvania Transportation Authority.
– Arranging and underwriting (euro) 600 million of a total (euro) 1,200 million in senior and mezzanine facilities, with respect to Paribas Affaires Industrielles’ acquisition of Holdelis SA (“Elis”). The mezzanine financing was the largest ever provided in a European LBO ((euro) 290 MM). Elis is the European leader in textile rental, hygiene and well-being services.
– As part of a continuing focus to decrease costs in light of the external market conditions, CIBC World Markets reduced staffing levels by approximately 250 positions during the quarter. The reductions occurred primarily in the U.S. and are the result of continued low levels of business activity, particularly in investment banking. In addition, selective reductions were made in Asian, European and commercial banking businesses. The steps to rightsize and refocus the U.S. operations, combined with the strong performance of many business groups during the year, leave CIBC’s U.S. franchise well-positioned for a market recovery.
Amicus
During the quarter, CIBC decided that it would close its U.S. electronic banking operations and focus on further developing its electronic banking operations in Canada, through its co-venture with Loblaw Companies Limited. The Canadian operations, under the President’s Choice Financial brand, continued to show strong growth in all areas, including:
– Growth in customers: Quarter-over-quarter the number of President’s Choice Financial customers grew by 8.2%. At year-end, the total number of customers was 1.05 million, up 40% from fiscal 2001.
– Growth in funds managed: Funds managed also showed strong growth, increasing 8.4% from the previous quarter. At year-end, total funds managed grew to $7.0 billion, up 58% from fiscal 2001.
– Number of pavilions: The number of pavilions operating across Canada increased to 212 by year end.
For complete details on CIBC’s third quarter performance visit CardData ([www.carddata.com][1]).
[1]: http://www.carddata.com
