U.S. Commercial Banking and Wealth Management – 2018 Financial Review

2018 financial review

  • Strong loan and deposit growth of 11% and 12%, respectively, reflecting our continued focus on building client relationships
  • Asset quality remained stable, with non-performing assets representing 0.64% of total assets at October 31, 2018
  • Year-over-year growth of 8% in AUA and 2% in AUM
  • Four CIBC Private Wealth Management Advisors were ranked in Barron's 2018 Top Women Financial Advisors List

Results(1)

Table of Results for U.S. Commercial Banking and Wealth Management for the last three years from 2018 to 2016.
$ millions, for the year ended October 31 2018 2017(2) 2016
Revenue
Commercial banking $ 1,197 $ 532 $ 166
Wealth management 563 324 217
Other 6 20 2
Total revenue(3)(4) 1,766 876 385
Provision for (reversal of) credit losses
Impaired(5)   67   37   (2)
Performing(5) 12 47 n/a
Provision for (reversal of) credit losses 79 84 (2)
Non-interest expenses 1,023 534 288
Income before income taxes 664 258 99
Income taxes(3) 99 55 12
Net income $ 565 $ 203 $ 87
Net income attributable to:
Equity shareholders (a) $ 565 $ 203 $ 87
Efficiency ratio 57.9 % 61.0 % 74.8 %
Return on equity(6) 8.1 % 7.5 % 17.6 %
Charge for economic capital(6) (b) $ (664) $ (256) $ (48)
Economic profit(6) (a+b) $ (99) $ (53) $ 39
Average assets ($ billions) $ 42.0 $ 19.9 $ 8.4
Average loans ($ billions) $ 30.4   $ 15.9   $ 8.0
Average deposits ($ billions) $ 22.3 $ 7.6 $ 0.1
AUA ($ billions) $ 80.0 $ 74.0 $ 44.1
AUM ($ billions) $ 60.0 $ 58.7 $ 38.0
Full-time equivalent employees 1,947 1,753 310
(1)
For additional segmented information, see Note 30 to the consolidated financial statements.
(2)
Certain information has been reclassified to conform to the funds transfer pricing methodology adopted in the current year relating to CIBC Bank USA.
(3)
Revenue and income taxes are reported on a TEB basis. Accordingly, revenue and income taxes include a TEB adjustment of $2 million (2017: $2 million; 2016: nil). The equivalent amounts are offset in the revenue and income taxes of Corporate and Other.
(4)
Included $55 million of accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank, shown as an item of note (2017: $45 million, of which $31 million was included as an item note in the fourth quarter of 2017).
(5)
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 other than that of CIBC Bank USA was recognized in Corporate and Other.
(6)
For additional information, see the “Non-GAAP measures” section.
n/a
Not applicable.

Financial overview

Net income was up $362 million or 178% from 2017, primarily due to the inclusion of the results of CIBC Bank USA for the full year of $407 million (2017: $96 million). The prior year only included the results of CIBC Bank USA following the acquisition on June 23, 2017.

Revenue

Revenue was up $890 million or 102% from 2017. CIBC Bank USA contributed $1,257 million to revenue during the year (2017: $448 million).

Commercial banking revenue was up $665 million or 125%, primarily due to the inclusion of the results of CIBC Bank USA for the full year, which included accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank.

Wealth management revenue was up $239 million or 74%, primarily due to the inclusion of the results of CIBC Bank USA for the full year, which included accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank, and growth in average AUA mainly due to the acquisition of Geneva Advisors in the fourth quarter of 2017.

Other revenue was down $14 million or 70%, primarily due to the treasury activities of CIBC Bank USA.

Provision for credit losses

Provision for credit losses was down $5 million or 6% from 2017. Provision for credit losses on impaired loans was up due to higher loan losses in CIBC Bank USA, partially offset by lower loan losses in the pre-existing U.S. real estate finance portfolio. Provision for credit losses on performing loans was down, primarily due to the establishment of a collective allowance (prior to our adoption of IFRS 9) for new loan originations and renewals of acquired loans relating to CIBC Bank USA in the prior year, of which $35 million was shown as an item of note in the fourth quarter of 2017.

Non-interest expenses

Non-interest expenses were up $489 million or 92% from 2017, primarily due to the inclusion of the non-interest expenses of CIBC Bank USA for the full year of $666 million (2017: $244 million), which included compensation expenses of $32 million (2017: $40 million) related to the retention of key employees.

Income taxes

Income taxes were up $44 million or 80% from 2017, primarily due to higher income from the inclusion of the results of CIBC Bank USA for the full year, partially offset by a lower effective tax rate due to the U.S. tax reforms enacted in the first quarter of 2018.

Average assets

Average assets were up $22.1 billion or 111% from 2017 due to the inclusion of the balances of CIBC Bank USA for the full year and growth in commercial loans.

Assets under administration

AUA were up $6.0 billion or 8% from 2017, primarily due to the favourable impact of foreign exchange rates, net sales, and market appreciation. AUM amounts are included in the amounts reported under AUA.