CIBC loses $1.46B on huge writedowns
Last Updated: Thursday, February 28, 2008 | 4:12 PM ET
CBC News
CIBC posted a $1.46-billion loss in the first quarter as it took billions of dollars in charges related to the credit crunch and the beleaguered U.S. subprime mortgage market.
The bank said Thursday that the loss totalled $4.39 share. In the first quarter of its previous fiscal year, CIBC posted a profit of $770 million, or $2.11 diluted earnings per share (EPS).
CIBC 3-month TSX chart
"Our losses related to the U.S. residential mortgage market are a significant disappointment, and are not aligned with our strategic imperative of consistent and sustainable performance," said CIBC president and CEO Gerald McCaughey in a release.
"Our focus is to get CIBC back on the strategic track we set for the organization which has, for the past two years, resulted in significant value for our shareholders," he said.
The first-quarter loss includes several big charges, including:
- $2.28 billion on the credit protection purchased from ACA Financial Guaranty Corp.
- $626 million on the credit protection purchased from financial guarantors other than ACA.
- $473 million for losses on collateralized debt obligations and residential mortgage-backed securities related to the U.S. residential mortgage market.
The bank said CIBC Retail Markets reported revenue of $2,371 million, up $98 million or four per cent year over year, and a 15 per cent increase in profits to $657 million.
Business volume growth and the acquisition of FirstCaribbean
International Bank helped boost results, while lower brokerage revenue weighed on them.
CIBC World Markets reported a loss of $2.2 billion on the slew of writedowns the bank took in the quarter.
The bank said the division is not out of the woods yet.
"Market and economic conditions relating to the financial guarantors may change in the future, which could result in significant future losses," CIBC said.
In the wake of the earnings report, CIBC shares slipped $1.05, or 1.5 per cent, to $67.95 on the TSX.
In conjunction with its earnings report, CIBC declared a dividend of 87 cents a share, which is unchanged from the previous quarter.
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