Shares of the Canadian Imperial Bank of Commerce fell sharply Thursday after it announced it was raising $1.6 billion of new capital by issuing notes paying nearly 10 per cent interest on one series and 10.25 per cent on another.
The bank's stock was down 4.5 per cent, falling $1.77 to $37.86 in trading on the TSX.
The bank is not the only one to issue high-priced debt. The Toronto-Dominion Bank raised $1 billion in January with interest rates of 9.523 to 10 per cent.
CIBC announced that a wholly-owned subsidiary, CIBC Capital Trust, had agreed to sell $1.3 billion of CIBC Tier 1 Notes-Series A paying interest of 9.976 per cent. It also agreed to sell $300 million worth of Series B notes paying 10.25 per cent.
Tier 1 is a key level of capital required by bank regulators. Currently, the Tier 1 requirement is seven per cent.
CIBC said its Tier 1 level would have been about 11.5 per cent on Jan. 31 if the notes had been sold then. The actual rate on Jan. 31 was 9.8 per cent.
That 11.5 per cent ratio also includes recent sales of preferred shares.
Canadian banks have raised over $15 billion in Tier 1 capital, Mark Carney, governor of the Bank of Canada, said in January.