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Financial - Loss
CIBC announces $1.46 Billion Loss in first quarter of 2008
TORONTO - CIBC announced a net loss of $1,456 million ( $1.46 billion) for the first quarter ended January 31, 2008, compared with net income of $770 million for the same period last year. Diluted loss per share was $4.39, compared with $2.11 diluted earnings per share (EPS) a year ago. Cash diluted loss per share was $4.36(1), compared with cash diluted EPS of $2.12(1) a year ago.
CIBC's Tier 1 capital ratio at January 31, 2008 was 11.4%.
Results for the first quarter of 2008 were positively affected by the following items:
- $171 million ($115 million after-tax, or $0.34 per share) from
changes in credit spreads on the mark-to-market of our credit
derivatives on corporate loans ($128 million, $86 million after-tax)
and financial guarantors ($43 million, $29 million after-tax); and
- $56 million ($0.17 per share) of significant tax-related items.
Results for the first quarter were negatively affected by the following
items:
- $2.28 billion ($1.54 billion after-tax, or $4.51 per share) charge on
the credit protection purchased from ACA Financial Guaranty Corp.
(ACA);
- $626 million ($422 million after-tax, or $1.24 per share) charge on
the credit protection purchased from financial guarantors other than
ACA;
- $473 million ($316 million after-tax, or $0.93 per share) mark-to-
market losses, net of gains on related hedges, on collateralized debt
obligations (CDOs) and residential mortgage-backed securities (RMBS)
related to the U.S. residential mortgage market; and
- $108 million ($64 million after-tax, or $0.19 per share) combined
loss on the sale of some of CIBC's U.S. businesses to Oppenheimer
Holdings Inc. (Oppenheimer), management changes and the exit and
restructuring of certain other businesses.
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The net loss, diluted loss per share and cash diluted loss per share for
the first quarter of 2008 compared with net income of $884 million, $2.53
diluted EPS and $2.55(1) cash diluted EPS, respectively, for the prior
quarter, which included items of note aggregating to net earnings of $0.25 per
share.
"Our losses related to the U.S. residential mortgage market are a
significant disappointment and are not aligned with our strategic imperative
of consistent and sustainable performance," says Gerald T. McCaughey,
President and Chief Executive Officer. "Our focus is to get CIBC back on the
strategic track we set for the organization which has, for the past two years,
resulted in significant value for our shareholders."
Update on business priorities
Business strength
Despite a more challenging environment during the first quarter, CIBC's
retail businesses continued to perform well overall.
CIBC Retail Markets reported revenue of $2,371 million, up $98 million or
4% from the same quarter last year.
Net income for the first quarter was $657 million, up 15% from a year
ago. This strong result was supported by volume growth and our FirstCaribbean
International Bank acquisition, partially offset by lower brokerage revenue.
CIBC maintained or improved its market share in most key product areas.
In personal lending, market share stabilized after declines in past quarters
while CIBC repositioned the risk profile of this portfolio.
CIBC World Markets reported a loss of $2.2 billion. This loss was a
result of the previously noted valuation charges against purchased credit
protection from financial guarantors and write-downs on CDOs and RMBS related
to the U.S. residential mortgage market.
Market and economic conditions relating to the financial guarantors may
change in the future, which could result in significant future losses.
CIBC has taken several steps to improve the alignment of our World
Markets business activities with CIBC's objective of delivering consistent and
sustainable performance.
CIBC has curtailed its structured credit business activities in which the
U.S. residential mortgage exposures were originated and is gradually reducing
existing positions. On a broader scale, CIBC has adjusted its business mix by
exiting businesses that were not completely aligned with the desired risk
profile and strategy. During the quarter, CIBC closed the sale of its U.S.
domestic investment banking businesses to Oppenheimer and exited its European
leveraged finance business. CIBC also transferred its commercial banking
business to Retail Markets to enable World Markets to focus on its core
capital markets and investment banking businesses.
Productivity
In addition to continuing to invest and position its core businesses for
long term performance, CIBC remains committed to its strategic objective of
achieving a median efficiency ratio among the major Canadian banks.
CIBC's target for 2008 is to hold expenses flat relative to annualized
2006 fourth quarter expenses, excluding FirstCaribbean and the U.S.
restructuring initiated in 2007.
Expenses for the first quarter were $1,761 million, down from
$1,874 million in the prior quarter primarily due to lower expenses related to
stock appreciation rights and lower costs associated with the sale of some of
our U.S. businesses.
CIBC's focus in the area of productivity remains on achieving
improvements in revenue growth, while maintaining expense discipline.
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