By Robb M. Stewart


Canadian Imperial Bank of Commerce's shares outperformed those of Canada's other big banks Friday after the lender kicked off earnings season for the industry with a beat on its first-quarter adjusted earnings thanks to strong trading revenue and the benefits of higher interest rates.

In morning trading, the shares were 1% higher at 61.81 Canadian dollars (US$45.62), while shares of the country's other major banks and the blue chip S&P TSX 60 were all lower. The stock has outperformed its peers so far this year, rising 13%.

CIBC's net income was down sharply with a jump in the provision for legal provisions and a hit from a tax levied against the industry by Ottawa, falling to C$432 million, or C$0.39 a share, in the three months to the end of January, from C$1.87 billion, or C$2.01 a share, a year earlier.

Excluding provisions and tax, earnings for the first quarter were up 6.1% on-year and CIBC reported adjusted earnings of C$1.94 a share, ahead of the C$1.71 mean estimate of analysts polled by FactSet.

The beat was welcome news after the bank's fourth-quarter earnings fell short of expectations, said Scotia Capital analyst Meny Grauman. He said that the results weren't without areas of weakness, but investors should nevertheless breath a sign of relief.

Net interest income was up 2.3%, at C$3.21 billion, driven by balance-sheet growth and higher interest rates after central banks in Canada and the U.S. aggressively lifted their policy rates over the last year to tackle inflation, though the bank said it saw some mortgage-lending compression. Noninterest income increased 15%, to C$2.72 billion, boosted by a jump in trading revenue on the bank of higher rates, commodities and foreign exchange.

The bank's provision for credit losses for the quarter was C$295 million, up sharply from C$75 million a year earlier but down from C$436 million the quarter before. The figure was lower than the consensus forecast of analysts and below the C$400 million penciled in by Scotia's Mr. Grauman.

CIBC's CET1 capital ratio stood at 11.6%, slightly below the level a year earlier but ahead of the 11.5% analysts expected and 0.6 percentage point ahead of the regulatory requirement.

The bank's ratio was a positive surprise that will help alleviate concerns over capital, said Keefe, Bruyette & Woods analysts Mike Rizvanovic and Abhilash Shashidharan, adding it was a good quarterly result for CIBC overall, albeit one driven almost entirely by elevated trading revenue and low provisions for credit losses.

Earnings season for the big banks continues Tuesday with first-quarter numbers due from Bank of Montreal and Bank of Nova Scotia, whose shares were down 0.7% and 0.9%, respectively, in early trading.


Write to Robb M. Stewart at robb.stewart@wsj.com


(END) Dow Jones Newswires

02-24-23 1013ET