On the surface it looked like a good day for the Canadian Imperial Bank of Commerce (CIBC). However, amid the glory of significant first-quarter profits came a stark warning.
Loan losses, the bank believes, could double if the country slips towards recession due to the ongoing slump in oil prices. The forecast was made by the bank’s chief risk officer Laura Dottori-Attanasio as she told analysts that “if we went into a recessionary-type environment we could see ourselves doubling our loan losses.”
The bank enjoyed a growth in retail and business banking during the quarter, which helped to offset its losses from oil sector loans. Both the Bank of Montreal and Royal Bank of Canada reported similar losses based on impaired oil and gas loans earlier in the week, and Dottori-Attanasio believes the trend will continue for the foreseeable future.
“We are seeing this quarter a lot of downgrades in the oil and gas space, an increase in delinquencies,” she said. “Our expectation would be to see increased loan loss provisions on a go-forward basis.”
Overall for CIBC, impaired loans within the sector climbed to $128 million during the quarter – that’s a leap from zero, just one year earlier.
However, overall the bank’s net income reached $982 million – a climb from $923 million one year earlier. There was a six per cent increase in earnings for its business banking and retail division; but net income within its wealth management arm slipped by seven per cent, as well as being down 10 per cent across the capital markets.