Capital Markets – 2018 Financial Review

  • Revenue
    ($ billions)
     
    2016: 2.8, 2017: 2.8, 2018: 2.9
  • Net income
    ($ millions)
     
    2016: 992, 2017: 1,090, 2018: 1,069
  • Efficiency ratio
    (%)
     
    2016: 48.2, 2017: 48.6, 2018: 51.2
  • Average value-at-risk (VaR)
    ($ millions)
     
    2016: 5.8, 2017: 6.5, 2018: 5.3

As a leading capital markets franchise in Canada and banking partner to our clients around the world, Capital Markets acted as:

  • Financial advisor to the shareholders of GFL Environmental Inc. on a transaction whereby BC Partners, Ontario Teachers’ Pension Plan and other investors agreed to recapitalize the company's ownership at an implied enterprise value of $5.1 billion;
  • Financial advisor, co-lead arranger and joint bookrunner to Metro Inc. on the $4.5 billion acquisition of the Jean Coutu Group Inc., $3.4 billion committed bank facilities and $1.2 billion senior unsecured notes offering;
  • Joint lead manager and joint bookrunner on the inaugural $1.5 billion green bond offering for CPPIB Capital Inc., which was the largest-ever Canadian dollar green bond;
  • Bookrunner on a US$650 million First Mortgage Bond offering for Public Service Electric & Gas representing CIBC’s first active bookrunner role for the PSEG family and the third joint bookrunner title;
  • Lead manager and joint bookrunner on $405 million offering of subscription receipts and flow-through shares for NuVista Energy Ltd. in support of its acquisition of assets from Cenovus Energy Inc. with CIBC acting as exclusive financial advisor;
  • Financial advisor to Superior Plus LP on its $900 million acquisition of NGL Energy’s Retail propane distribution business, as well as joint bookrunner on a concurrent $400 million subscription receipt offering and a $150 million high-yield note offering, and acted as co-underwriter of a $400 million secured bridge loan facility. CIBC also executed related capital markets hedge transactions;
  • Lead manager and joint bookrunner on $288 million subscription receipts offering, co-lead arranger, joint bookrunner and administrative agent on $1.4 billion in credit facilities for Transcontinental Inc. in support of its acquisition of Coveris Americas; and
  • Lead manager and joint bookrunner on $242 million initial public offering of common shares for MAV Beauty Brands Inc.

Capital Markets awards and recognition

  • The Leader in Canadian Equity Trading – #1 in Volume, Value and Number of Trades, TSX and ATS Market Share Report, 2009 – present (IRESS Market Technology)
  • Share Leader by Greenwich Associates in:
    • Overall Canadian Fixed Income Market Share Canadian Equity Trading Share (2018)
    • Canadian Equity Algo Trading Share (2018)
    • Canadian Equity Research/Advisory Vote Share (2017 – 2018)
    • Canadian Equity Trading Share (2017 – 2018)
  • Quality Leader in Canadian Foreign Exchange Services Quality (2017 – 2018) by Greenwich Associates
  • Multi-deal winner at the 2018 IJGlobal Americas Deals of the Year Awards:
    • North America Project Bond Deal of the Year – Indiana Toll Road Concession Company
    • North America Transmission Deal of the Year – Alberta Powerline, FortMcMurray West 500 kV Transmission Project
    • North America Social Infrastructure Deal of the Year – Ohio State University Utility System
    • North America Airport Deal of the Year – Bermuda Skyport
  • CIBC Capital Markets was the #1 initial public offering underwriter in Canada by Bloomberg (2000 – 2018)
  • Top Canadian Prime Broker, by Alternative IQ (2016 – 2018)
  • Revenue – Global markets
    ($ millions)
     
    2016: 1,645, 2017: 1,601, 2018: 1,674
  • Revenue – Corporate and investment banking
    ($ millions)
     
    2016: 1,093, 2017: 1,216, 2018: 1,229

Results(1)

Table of Results for Capital Markets for the last three years from 2018 to 2016.
$ millions, for the year ended October 31 2018 2017 2016
Revenue
Global markets $ 1,674 $ 1,601 $ 1,645
Corporate and investment banking 1,229 1,216 1,093
Other 9 6 18
Total revenue(2) 2,912 2,823 2,756
Provision for (reversal of) credit losses
Impaired(3)   8   (4)   155
Performing(3) (38) n/a n/a
Provision for (reversal of) credit losses (30) (4) 155
Non-interest expenses 1,492 1,373 1,328
Income before income taxes 1,450 1,454 1,273
Income taxes(2) 381 364 281
Net income $ 1,069 $ 1,090 $ 992
Net income attributable to:
Equity shareholders (a) $ 1,069 $ 1,090 $ 992
Efficiency ratio 51.2 % 48.6 % 48.2 %
Return on equity(4) 39.4 % 35.5 % 30.6 %
Charge for economic capital(4)(b) $ (266) $ (299) $ (314)
Economic profit(4) (a+b) $ 803 $ 791 $ 678
Average assets ($ billions) $ 166.2 $ 156.4 $ 154.8
Full-time equivalent employees 1,396 1,314 1,260
(1)
For additional segmented information, see Note 30 to the consolidated financial statements.
(2)
Revenue and income taxes are reported on a TEB basis. Accordingly, revenue and income taxes include a TEB adjustment of $278 million (2017: $298 million; 2016: $474 million). The equivalent amounts are offset in the revenue and income taxes of Corporate and Other.
(3)
As a result of our adoption of IFRS 9 effective November 1, 2017, we now recognize provision for credit losses on both impaired and performing loans in the SBU. In prior years, provision for credit losses on performing loans was recognized in Corporate and Other.
(4)
For additional information, see the “Non-GAAP measures” section.
n/a
Not applicable.

Financial overview

Net income was down $21 million or 2% from 2017, primarily due to higher non-interest expenses and a higher effective tax rate, partially offset by higher revenue and a higher reversal of credit losses.

Revenue

Revenue was up $89 million or 3% from 2017.

Global markets was up $73 million or 5%, primarily due to higher revenue from our foreign exchange and equity derivatives trading businesses and global markets financing activities, partially offset by lower revenue from the movement in reserves related to derivative client exposure and our commodities trading business.

Corporate and investment banking revenue was up $13 million or 1%, primarily due to higher corporate banking and advisory revenue, partially offset by lower investment portfolio gains and lower revenue from equity and debt underwriting.

Other revenue was comparable with the prior year.

Provision for (reversal of) credit losses

Reversal of credit losses was up $26 million from 2017, primarily due to a reduction in allowance for performing loans in the current year, driven by improvements in the oil and gas sector and an economic outlook that has improved since our adoption of IFRS 9 on November 1, 2017. The current year also included a provision for credit losses on impaired loans compared with a reversal of credit losses on impaired loans in the prior year due to recoveries in the oil and gas sector.

Non-interest expenses

Non-interest expenses were up $119 million or 9% from 2017, primarily due to higher performance-based and employee-related compensation and spending on strategic initiatives.

Income taxes

Income taxes were up $17 million or 5% from 2017, primarily due to the impact of changes in the proportion of income subject to varying rates of tax in different jurisdictions.

Average assets

Average assets were up $9.8 billion or 6% from 2017, primarily due to an increase in securities purchased under resale agreement and loan balances, partially offset by lower trading securities.