CIBC eyeing acquisitions in U.S. wealth management, private banking

TORONTO – CIBC (TSX:CM) is eyeing acquisitions in the private banking and wealth management business south of the border, chief executive Victor Dodig said as the bank reported its fourth-quarter results.

“We’re trying to look at companies that could fit our culture and will contribute not only to the strength of our culture, but also will contribute over the medium term to our bottom line,” Dodig told a conference call with investors Thursday.

“That stuff takes time. And when the right time comes, we’ll make those investments. But there’s so much opportunity at home today that we need to focus on that element of our franchise, as well.”

Dodig said the bank needs to ramp up the scale of its operations, particularly in private wealth management in the U.S., and would like to snatch up a company in the $1 billion to $2 billion range.

CIBC raised its quarterly dividend by three cents to $1.03 per share as it reported Thursday a fourth-quarter profit of $811 million, or $1.98 in diluted earnings per share, down from $825 million, or $2.02 per diluted share, in the same quarter a year ago.

However, its adjusted net income rose to $911 million, from $894 million a year earlier, while adjusted diluted earnings per share rose to $2.24 from $2.19 last year. Revenue for the quarter was $3.42 billion, up from $3.18 billion a year earlier.

Analysts had expected adjusted earnings of $2.25 per share and revenue of $3.4 billion.

Talk of making a deal in the U.S. by CIBC’s new chief executive, who took over the top job in September, comes as the bank has been making tentative steps to move back into the U.S. market.

CIBC had scaled back in the U.S. after making several expensive missteps including a US$2.4-billion payment to settle an Enron lawsuit.

However, the bank acquired Atlantic Trust Private Wealth Management in the U.S. earlier this year in a bid to grow its wealth management business.

While emphasizing that the bank is not in any rush to make an acquisition, Dodig added that there a number of “interesting companies” that are particularly appealing and have some scarce and valuable traits.

“If the culture fits, if the math works, we would do those. if it doesn’t work for now, we take our time.”

Barclays analyst John Aiken said he doesn’t believe an acquisition is imminent, but noted it does seem the bank would prefer to go shopping than return excess cash to shareholders.

“We believe the market is fully expecting an acquisition,” Aiken said in a note to clients. “However, management is prudently cautious, attempting to temper the outlook for timing as it does not want to rush into any transaction just for the sake of doing a deal, preferring to make sure that the criteria match up.”

The bank said its fourth-quarter profit included several items that collectively had a negative impact totalling 26 cents per share.

The largest item, an $82-million after-tax charge related the valuation of its uncollateralized derivatives, was worth 21 cents per share. Another item, worth $13 million after taxes or three cents per share, related to its travel rewards credit cards and its deal with Aeroplan and TD Bank .

CIBC’s retail and business banking division had $2.05 billion of revenue and $602 million of net income in the fourth quarter. Wealth management had $584 million of revenue and $119 million of net income, while wholesale banking had $468 million of revenue and $136 million of net income.

For the full year, CIBC earned $3.2 billion, down from $3.35 billion. But its adjusted profit rose to a record $3.7 billion — up $100 million from last year — with total revenue was nearly $13.4 billion, up $700 million from 2013.

CIBC also announced Thursday that former Liberal deputy prime minister John Manley, who has been an independent director on CIBC’s board since 2005, will become its chairman at its annual meeting on April 23.

Since leaving federal politics, where he was at various times industry minister, foreign affairs minister and finance minister, Manley has held a number of senior private-sector positions. He currently heads the Canadian Council of Chief Executives.

Note to readers: This is a corrected story. A previous version misstated fourth-quarter revenue at $3.2 billion.