UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of May, 2021

Commission File Number: 1-14678

 

 

CANADIAN IMPERIAL BANK OF COMMERCE

(Translation of registrant’s name into English)

 

 

Commerce Court

Toronto, Ontario

Canada M5L 1A2

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☐                Form 40-F  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934:

Yes  ☐                No  ☒

If yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g 3-2(b):                                       

 

 

 


The information contained in this report under “Management’s Discussion and Analysis” on pages 1-39 and “Interim Consolidated Financial Statements”, including the notes thereto on pages 40-65, is incorporated by reference into Registration Statements on Form S-8 File Nos. 333-09874, 333-130283 and 333-218913, Form F-10 File No. 333-232417 and Form F-3 File Nos. 333-219550, 333-220284 and 333-233663.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

    CANADIAN IMPERIAL BANK OF COMMERCE
May 27, 2021             By:   /s/ Allison Mudge
            Name:   Allison Mudge
            Title:   Senior Vice-President

 


EXHIBIT INDEX

 

Exhibit

  

Description of Exhibit

99.1    Report to Shareholders for the Second Quarter, 2021
101    Interactive Data File
Table of Contents

Exhibit 99.1

LOGO

 

 

Report to Shareholders for the Second Quarter, 2021

www.cibc.com    May 27, 2021

 

Report of the President and Chief Executive Officer

Overview of results

CIBC today announced its financial results for the second quarter ended April 30, 2021.

Second quarter highlights

 

          Q2/21             Q2/20             Q1/21            

YoY

Variance

           

QoQ

Variance

    

Reported Net Income

      $1,651 million           $392 million           $1,625 million           +321%           +2%    

Adjusted Net Income (1)

      $1,666 million           $441 million           $1,640 million           +278%           +2%    

Reported Diluted Earnings Per Share (EPS)

      $3.55           $0.83           $3.55           +328%           0%    

Adjusted Diluted EPS (1)

      $3.59           $0.94           $3.58           +282%           0%    

Reported Return on Common Shareholders’ Equity (ROE)

      17.1%           4.0%           17.0%                  

Adjusted ROE (1)

      17.3%           4.5%           17.2%                  

Common Equity Tier 1 Ratio

      12.4%           11.3%           12.3%                            

Results for the second quarter of 2021 were affected by the following item of note aggregating to a negative impact of $0.04 per share:

 

$20 million ($15 million after-tax) amortization of acquisition-related intangible assets.

Our Common Equity Tier 1 ratio was 12.4% at April 30, 2021 compared with 12.3% at the end of the prior quarter. CIBC’s leverage ratio at April 30, 2021 was 4.7%.

Our strong performance in the second quarter of 2021 is a result of executing on our client-focused growth strategy. We are delivering results by building on the momentum we have established in our Canadian consumer franchise, further accelerating our performance in areas where we have strength, and simplifying and transforming our bank to enable reinvestment for growth.

Core business performance

Canadian Personal and Business Banking reported net income of $603 million for the second quarter, up $440 million or 270% from the second quarter a year ago mainly due to lower provisions for credit losses. Adjusted pre-provision, pre-tax earnings(1) were up $19 million or 2% from a year ago mainly due to robust volume growth and lower expenses, partially offset by narrower margins as a result of changes in the interest rate environment.

Canadian Commercial Banking and Wealth Management reported net income of $399 million for the second quarter, up $193 million or 94% from the second quarter a year ago, primarily due to lower provisions for credit losses and higher revenues across all businesses, partially offset by higher expenses. Pre-provision, pre-tax earnings(1) were up $61 million or 13% compared with the second quarter a year ago, primarily due to higher fee revenue and strong volume growth in commercial banking, while wealth management revenue benefitted from significant growth in asset balances driven by market appreciation and strong mutual fund sales, in addition to increased investment activity by clients. Higher expenses were primarily driven by revenue-based variable compensation reflecting favourable business results.

U.S. Commercial Banking and Wealth Management reported net income of $216 million for the second quarter, up $201 million or 1340% from the second quarter a year ago. Excluding items of note, adjusted net income(1) was $229 million, up $197 million or 616% from the second quarter a year ago, due to lower provisions for credit losses and higher U.S. dollar revenue, partially offset by the impact of foreign exchange translation. In U.S. dollars, adjusted pre-provision, pre-tax earnings(1) were up US$48 million or 27% (CAD$36 million or 15%) from the second quarter a year ago due to higher revenue, partially offset by higher expenses. Higher revenue was primarily driven by strong volume growth and higher fees, while higher expenses reflect increased performance-based compensation.

Capital Markets reported net income of $495 million for the second quarter, up $318 million or 180% from the second quarter a year ago, primarily due to higher revenue and a lower provision for credit losses, partially offset by higher expenses. Pre-provision, pre-tax earnings(1) were up 38% from a year ago, driven by higher revenues across trading and corporate and investment banking, partially offset by higher performance-based compensation.

 

(1)

For additional information, see the “Non-GAAP measures” section. Pre-provision, pre-tax earnings is revenue net of non-interest expenses and is a non-GAAP measure. Adjusted pre-provision, pre-tax earnings is revenue net of non-interest expenses adjusted for items of note and is a non-GAAP measure.


Table of Contents

Making a difference in our communities

At CIBC, we are committed to strengthening our communities and giving back is deeply embedded in our culture. This quarter, investments in our communities included:

 

Announced an additional $1 million investment aimed at supporting the next generation of leaders and changemakers from the Black community, including creating a scholarship program through a partnership with the BlackNorth Initiative;

 

Celebrated International Women’s Day with a focus on shared stories of strength and resiliency by hosting a client webinar and launching our partnership with The Prosperity Project and their Canadian Household survey;

 

Opened applications for the second year of the CIBC Future Heroes Bursary program with the goal to help post-secondary students achieve their ambitions of pursuing a career in healthcare. 125 bursaries valued at $2,500 will be awarded to students entering their first year of an eligible healthcare undergraduate, certificate or diploma program; and

 

Celebrated National Volunteer Week by doubling the reward dollars we donate when team members volunteer their time to a cause they are passionate about.

Victor G. Dodig

President and Chief Executive Officer

 

ii   CIBC SECOND QUARTER 2021


Table of Contents

Enhanced Disclosure Task Force

The Enhanced Disclosure Task Force (EDTF), established by the Financial Stability Board, released its report “Enhancing the Risk Disclosures of Banks” in 2012, which included thirty-two disclosure recommendations. The index below provides the listing of these disclosures, along with their locations. EDTF disclosures are located in our 2020 Annual Report, quarterly Report to Shareholders, and supplementary packages, which may be found on our website (www.cibc.com). No information on CIBC’s website, including the supplementary packages, should be considered incorporated herein by reference.

 

                 Second quarter, 2021         
Topics   Recommendations     Disclosures  

Management’s

discussion

and analysis

 

Consolidated

financial

statements

   

Pillar 3 report
and

Supplementary

regulatory

capital

disclosure

   

2020

Annual

Report

 
                 Page references  
General     1     Index of risk information – current page            
         
      2     Risk terminology and measures (1)           69–70      
         
      3     Top and emerging risks   20         50  
         
      4     Key future regulatory ratio requirements   18, 33, 34     61       9, 16      
36, 39, 76, 78,
166
 
 
Risk governance, risk management and business model     5     Risk management structure             44, 45  
    6     Risk culture and appetite             43, 46, 47  
    7     Risks arising from business activities   23         48, 53  
    8     Bank-wide stress testing   26                    

 

31, 49, 57

71, 74

 

 

 

 

Capital adequacy and risk-weighted assets     9     Minimum capital requirements   16     61         31, 166  
    10     Components of capital and reconciliation to the consolidated regulatory balance sheet           8–11       36  
    11     Regulatory capital flow statement           12       37  
    12     Capital management and planning             39, 166  
    13     Business activities and risk-weighted assets   23       4       38, 53  
    14     Risk-weighted assets and capital requirements           4       33, 38  
    15     Credit risk by major portfolios           27–36       56–61  
    16     Risk-weighted assets flow statement           4, 5       38  
         
      17     Back-testing of models                 67, 68       48, 57, 70  
Liquidity     18     Liquid assets   32                     75  
Funding     19     Encumbered assets   33         75  
         
      20     Contractual maturities of assets, liabilities and off-balance sheet instruments   37         79  
         
      21     Funding strategy and sources   35                     77  
Market risk     22     Reconciliation of trading and non-trading portfolios to the consolidated balance sheet   29         69  
         
      23     Significant trading and non-trading market risk factors   30–31         69–73  
         
      24     Model assumptions, limitations and validation procedures             69–73  
         
      25     Stress testing and scenario analysis                         31, 71  
Credit risk     26     Analysis of credit risk exposures   24–28       6–7, 63–66      

58–67,

138–145, 186

 

 

         
      27     Impaired loan and forbearance policies   24, 27         55, 65, 85, 116  
         
      28     Reconciliation of impaired loans and the allowance for credit losses   27     54         65, 139  
         
      29     Counterparty credit risk arising from derivatives   26       66, 35 (2)      

55, 59,

156–157

 

 

         
      30     Credit risk mitigation   24             20, 51, 66      

55, 61,

156–157

 

 

Other risks     31     Other risks   38         80–82  
         
      32     Discussion of publicly known risk events         63               80, 179  
(1)

A detailed glossary of our risk and capital terminology is included on page 198 to 202 of our 2020 Annual Report.

(2)

Included in our supplementary financial information package.

 

CIBC SECOND QUARTER 2021     iii  


Table of Contents

Management’s discussion and analysis

 

Management’s discussion and analysis (MD&A) is provided to enable readers to assess CIBC’s financial condition and results of operations as at and for the quarter and six months ended April 30, 2021 compared with corresponding periods. The MD&A should be read in conjunction with our 2020 Annual Report and the unaudited interim consolidated financial statements included in this report. Unless otherwise indicated, all financial information in this MD&A has been prepared in accordance with International Financial Reporting Standards (IFRS or GAAP) and all amounts are expressed in Canadian dollars. Certain disclosures in the MD&A have been shaded as they form an integral part of the interim consolidated financial statements. The MD&A is current as of May 26, 2021. Additional information relating to CIBC is available on SEDAR at www.sedar.com and on the U.S. Securities and Exchange Commission’s (SEC) website at www.sec.gov. No information on CIBC’s website (www.cibc.com) should be considered incorporated herein by reference. A glossary of terms used throughout this quarterly report can be found on pages 196 to 202 of our 2020 Annual Report.

Contents

 

    2      Second quarter financial highlights
    
    3      External reporting changes
    
    3      Financial performance overview
    3      Economic outlook
    4      Significant events
    4      Financial results review
    6      Review of quarterly financial information
    
    7      Non-GAAP measures
    
    9      Strategic business units overview
    9      Canadian Personal and Business Banking
    10      Canadian Commercial Banking and Wealth Management
    11      U.S. Commercial Banking and Wealth Management
    12      Capital Markets
    13      Corporate and Other

 

    15      Financial condition
    15      Review of condensed consolidated balance sheet
    16      Capital management
    19      Off-balance sheet arrangements
    
    20      Management of risk
    20      Risk overview
    20      Top and emerging risks
    24      Credit risk
    29      Market risk
    32      Liquidity risk
    38      Other risks
    
    38      Accounting and control matters
    38      Critical accounting policies and estimates
    38      Accounting developments
    39      Other regulatory developments
    39      Controls and procedures
    39      Related-party transactions
 

 

A NOTE ABOUT FORWARD-LOOKING STATEMENTS: From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including in this report, in other filings with Canadian securities regulators or the SEC and in other communications. All such statements are made pursuant to the “safe harbour” provisions of, and are intended to be forward-looking statements under applicable Canadian and U.S. securities legislation, including the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements made in the “Financial performance overview – Economic outlook”, “Financial performance overview – Significant events”, “Financial performance overview – Financial results review”, “Financial performance overview – Review of quarterly financial information”, “Financial condition – Capital management”, “Management of risk – Risk overview”, “Management of risk – Top and emerging risks”, “Management of risk – Credit risk”, “Management of risk – Market risk”, “Management of risk – Liquidity risk”, “Accounting and control matters – Critical accounting policies and estimates”, “Accounting and control matters – Accounting developments”, and “Accounting and control matters – Other regulatory developments” sections of this report and other statements about our operations, business lines, financial condition, risk management, priorities, targets, ongoing objectives, strategies, the regulatory environment in which we operate and outlook for calendar year 2021 and subsequent periods. Forward-looking statements are typically identified by the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “forecast”, “target”, “objective” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could”. By their nature, these statements require us to make assumptions, including the economic assumptions set out in the “Financial performance overview – Economic outlook” section of this report, and are subject to inherent risks and uncertainties that may be general or specific. Given the continuing impact of the coronavirus (COVID-19) pandemic on the global economy, financial markets, and our business, results of operations, reputation and financial condition and continued pressure on oil prices, there is inherently more uncertainty associated with our assumptions as compared to prior periods. A variety of factors, many of which are beyond our control, affect our operations, performance and results, and could cause actual results to differ materially from the expectations expressed in any of our forward-looking statements. These factors include: the occurrence, continuance or intensification of public health emergencies, such as the COVID-19 pandemic, and any related government policies and actions; credit, market, liquidity, strategic, insurance, operational, reputation, conduct and legal, regulatory and environmental risk; currency value and interest rate fluctuations, including as a result of market and oil price volatility; the effectiveness and adequacy of our risk management and valuation models and processes; legislative or regulatory developments in the jurisdictions where we operate, including the Organisation for Economic Co-operation and Development Common Reporting Standard, and regulatory reforms in the United Kingdom and Europe, the Basel Committee on Banking Supervision’s global standards for capital and liquidity reform, and those relating to bank recapitalization legislation and the payments system in Canada; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions, and interest rate and liquidity regulatory guidance; the resolution of legal and regulatory proceedings and related matters; the effect of changes to accounting standards, rules and interpretations; changes in our estimates of reserves and allowances; changes in tax laws; changes to our credit ratings; political conditions and developments, including changes relating to economic or trade matters; the possible effect on our business of international conflicts and terrorism; natural disasters, disruptions to public infrastructure and other catastrophic events; reliance on third parties to provide components of our business infrastructure; potential disruptions to our information technology systems and services; increasing cyber security risks which may include theft or disclosure of assets, unauthorized access to sensitive information, or operational disruption; social media risk; losses incurred as a result of internal or external fraud; anti-money laundering; the accuracy and completeness of information provided to us concerning clients and counterparties; the failure of third parties to comply with their obligations to us and our affiliates or associates; intensifying competition from established competitors and new entrants in the financial services industry including through internet and mobile banking; technological change; global capital market activity; changes in monetary and economic policy; general business and economic conditions worldwide, as well as in Canada, the U.S. and other countries where we have operations, including increasing Canadian household debt levels and global credit risks; our success in developing and introducing new products and services, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels; changes in client spending and saving habits; our ability to attract and retain key employees and executives; our ability to successfully execute our strategies and complete and integrate acquisitions and joint ventures; the risk that expected benefits of an acquisition, merger or divestiture will not be realized within the expected time frame or at all; and our ability to anticipate and manage the risks associated with these factors. This list is not exhaustive of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Any forward-looking statements contained in this report represent the views of management only as of the date hereof and are presented for the purpose of assisting our shareholders and financial analysts in understanding our financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. We do not undertake to update any forward-looking statement that is contained in this report or in other communications except as required by law.

 

 

CIBC SECOND QUARTER 2021     1  


Table of Contents

Second quarter financial highlights

 

           

As at or for the three

months ended

       

As at or for the six

months ended

 
Unaudited       

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30

       

2021

Apr. 30

   

2020

Apr. 30

 

Financial results ($ millions)

                 

Net interest income

    $ 2,747     $ 2,839     $ 2,762       $ 5,586     $ 5,523  

Non-interest income

        2,185       2,124       1,816         4,309       3,910  

Total revenue

      4,932       4,963       4,578         9,895       9,433  

Provision for credit losses

      32       147       1,412         179       1,673  

Non-interest expenses

        2,756       2,726       2,704         5,482       5,769  

Income before income taxes

      2,144       2,090       462         4,234       1,991  

Income taxes

        493       465       70         958       387  

Net income

      $ 1,651     $ 1,625     $ 392       $ 3,276     $ 1,604  

Net income (loss) attributable to non-controlling interests

      $ 4     $ 4     $ (8     $ 8     $ (1

Preferred shareholders

      51       30       30         81       61  

Common shareholders

        1,596       1,591       370         3,187       1,544  

Net income attributable to equity shareholders

      $ 1,647     $ 1,621     $ 400       $ 3,268     $ 1,605  

Financial measures

                 

Reported efficiency ratio

      55.9  %      54.9  %      59.1  %        55.4  %      61.2  % 

Operating leverage

      5.8  %      13.3  %      (3.7 )%        9.9  %      (4.3 )% 

Loan loss ratio (1)

      0.24  %      0.22  %      0.34  %        0.23  %      0.29  % 

Reported return on common shareholders’ equity (2)

      17.1  %      17.0  %      4.0  %        17.1  %      8.5  % 

Net interest margin

      1.42  %      1.41  %      1.55  %        1.41  %      1.58  % 

Net interest margin on average interest-earning assets (3)

      1.59  %      1.58  %      1.77  %        1.59  %      1.78  % 

Return on average assets (4)

      0.85  %      0.81  %      0.22  %        0.83  %      0.46  % 

Return on average interest-earning assets (3)(4)

      0.95  %      0.91  %      0.25  %        0.93  %      0.52  % 

Reported effective tax rate

        23.0  %      22.2  %      15.3  %        22.6  %      19.5  % 

Common share information

                   

Per share ($)

 

– basic earnings

    $ 3.56     $ 3.56     $ 0.83       $ 7.12     $ 3.47  
 

– reported diluted earnings

      3.55       3.55       0.83         7.10       3.46  
 

– dividends

      1.46       1.46       1.46         2.92       2.90  
 

– book value

      86.70       85.24       83.67         86.70       83.67  

Closing share price ($)

        127.78       108.98       82.48         127.78       82.48  

Shares outstanding (thousands)

 

– weighted-average basic

      448,455       447,281       444,739         447,859       444,997  
 

– weighted-average diluted

      449,345       447,929       445,188         448,621       445,610  
 

– end of period

      449,093       447,850       445,133         449,093       445,133  

Market capitalization ($ millions)

      $ 57,385     $ 48,807     $ 36,715       $ 57,385     $ 36,715  

Value measures

                 

Total shareholder return

      18.62  %      11.11  %      (22.21 )%        31.80  %      (24.26 )% 

Dividend yield (based on closing share price)

      4.7  %      5.3  %      7.2  %        4.6  %      7.1  % 

Reported dividend payout ratio

      41.0  %      41.1  %      176.0  %        41.0  %      83.6  % 

Market value to book value ratio

        1.47       1.28       0.99         1.47       0.99  

Selected financial measures – adjusted (5)

                 

Adjusted efficiency ratio (6)

      54.9  %      53.9  %      57.2  %        54.4  %      56.1  % 

Adjusted operating leverage

      4.4  %      2.0  %      (2.0 )%        3.1  %      (1.6 )% 

Adjusted return on common shareholders’ equity (2)

      17.3  %      17.2  %      4.5  %        17.2  %      10.3  % 

Adjusted effective tax rate

      23.0  %      22.3  %      15.1  %        22.6  %      20.3  % 

Adjusted diluted earnings per share

    $     3.59     $ 3.58     $ 0.94       $     7.17     $ 4.18  

Adjusted dividend payout ratio

        40.7  %      40.7  %      155.4  %        40.7  %      69.2  % 

On- and off-balance sheet information ($ millions)

                 

Cash, deposits with banks and securities

    $ 202,319     $ 213,786     $ 189,277       $ 202,319     $ 189,277  

Loans and acceptances, net of allowance

      432,120       420,975       420,579         432,120       420,579  

Total assets

      782,878       782,908       759,136         782,878       759,136  

Deposits

      576,563       573,927       543,788         576,563       543,788  

Common shareholders’ equity

      38,935       38,177       37,244         38,935       37,244  

Average assets

      795,373       799,948       725,701         797,698       702,362  

Average interest-earning assets (3)

      709,463       711,470       633,233         710,483       621,423  

Average common shareholders’ equity

      38,189       37,067       37,386         37,619       36,520  

Assets under administration (AUA) (7)(8)(9)

          2,783,059           2,518,517           2,283,749             2,783,059           2,283,749  

Assets under management (AUM) (8)(9)

        293,488       280,303       246,564         293,488       246,564  

Balance sheet quality and liquidity measures

                 

Risk-weighted assets (RWA) ($ millions)

    $ 257,997     $ 256,119     $ 261,763       $ 257,997     $ 261,763  

Common Equity Tier 1 (CET1) ratio (10)

      12.4  %      12.3  %      11.3  %        12.4  %      11.3  % 

Tier 1 capital ratio (10)

      13.9  %      13.8  %      12.5  %        13.9  %      12.5  % 

Total capital ratio (10)

      16.2  %      15.8  %      14.5  %        16.2  %      14.5  % 

Leverage ratio

      4.7  %      4.7  %      4.5  %        4.7  %      4.5  % 

Liquidity coverage ratio (LCR)

        134  %      142  %      131  %        n/a       n/a  

Other information

                 

Full-time equivalent employees

        44,066       43,890       44,204         44,066       44,204  
(1)

The ratio is calculated as the provision for credit losses on impaired loans to average loans and acceptances, net of allowance for credit losses.

(2)

Annualized.

(3)

Average interest-earning assets include interest-bearing deposits with banks, interest-bearing demand deposits with Bank of Canada, securities, cash collateral on securities borrowed, securities purchased under resale agreements, loans net of allowances, and certain sublease-related assets.

(4)

Net income expressed as a percentage of average assets or average interest-earning assets.

(5)

Adjusted measures are non-GAAP measures. Adjusted measures are calculated in the same manner as reported measures, except that financial information included in the calculation of adjusted measures is adjusted to exclude the impact of items of note. For additional information and a reconciliation of reported results to adjusted results, see the “Non-GAAP measures” section.

(6)

Calculated on a tax equivalent basis (TEB).

(7)

Includes the full contract amount of AUA or custody under a 50/50 joint venture between CIBC and The Bank of New York Mellon of $2,212.3 billion (January 31, 2021: $1,977.7 billion; April 30, 2020: $1,801.5 billion).

(8)

AUM amounts are included in the amounts reported under AUA.

(9)

Certain prior period information has been restated.

(10)

Effective beginning in the second quarter of 2020, ratios reflect the expected credit loss (ECL) transitional arrangement announced by OSFI on March 27, 2020.

n/a

Not applicable.

 

2   CIBC SECOND QUARTER 2021


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External reporting changes

Changes made to our business segments

The following external reporting changes were made in the first quarter of 2021:

 

Simplii Financial and CIBC Investor’s Edge, previously reported in Canadian Personal and Business Banking, are now part of the newly-created Direct Financial Services line of business in Capital Markets, along with certain other direct payment services that were previously in Capital Markets. This change was made to align with the mandates of the relevant strategic business units (SBUs).

 

The financial results associated with U.S. treasury activities in U.S. Commercial Banking and Wealth Management are now included within Treasury in Corporate and Other. In addition, the transfer pricing methodology between U.S. Commercial Banking and Wealth Management and Treasury in Corporate and Other has been enhanced. Both changes align the treatment of U.S. Commercial Banking and Wealth Management with our other SBUs, and allow for better management of interest rate and liquidity risks.

Prior period amounts have been revised accordingly. The changes impacted the results of our SBUs and how we measure the performance of our SBUs. There was no impact on our consolidated financial results from these changes.

Financial performance overview

Economic outlook

Although global economic activity has accelerated this year, the COVID-19 pandemic continues to have a significant adverse impact on the extent of that rebound. Restrictions imposed by governments around the world to limit the impact of the infection, such as travel restrictions, physical distancing measures, and the closure of certain businesses, continue to disrupt the global economy, and will limit the scope of the recovery until the rollout of the vaccination programs in most major markets is near completion and proven to be effective in controlling the virus. While vaccination of targeted groups has progressed across much of the world, uncertainty remains about how quickly a large enough majority of the population can be effectively immunized to reduce subsequent rates of infection, including in response to emerging variants of the virus. Our outlook assumes that effective mass vaccinations will continue in many countries over the spring and summer and that the vaccination programs will be able to effectively respond to the emerging variants, allowing for stronger global recovery in the latter half of the calendar year. Until then, we assume that temporary restraints on activity in response to the current wave of infections and the new variants will be in place to varying degrees across our target markets. Growth will continue in sectors less impacted by physical distancing measures, but other sectors will experience periods of disruption when regulations are tightened in response to new waves and strains of the virus. We generally expect to see stronger performance in the goods sector of the economy, but continued slack in the services sector. While global demand for fuel is growing, a rebound in supply from overseas producers should see crude prices stabilize near current levels over the balance of the calendar year.

In Canada, after a drop of 5.4% in calendar 2020, real gross domestic product (GDP) is expected to advance by approximately 5.7% in calendar 2021, with a deceleration in the second quarter and a resumption of faster growth in the second half of the calendar year. We expect that the unemployment rate will average approximately 7.7% in calendar 2021, well above full-employment levels. Both businesses and households will benefit from ongoing government fiscal support, which will reduce the impact of slower economic growth on insolvencies, business and household credit growth and retail transaction volumes relative to what would have occurred absent these measures. Government bond issuance will remain elevated to cover the resulting federal and provincial deficits. The Bank of Canada will maintain short-term interest rates at their current levels through calendar 2021, although longer-term rates will drift higher as economic growth accelerates, and the central bank eases up on its asset purchase program.

In the U.S., real GDP is expected to grow by approximately 6.6% in calendar 2021, after declining by almost 3.5% in the prior calendar year. Unemployment is expected to average approximately 5.3% in calendar 2021, still about one percentage point above full-employment levels. Large scale stimulus bills already enacted will boost demand, and provide enhanced support for households and businesses impacted by the pandemic, reducing its impact on insolvencies. We expect that the Federal Reserve will maintain near-zero short-term interest rates and continue to engage in asset purchases to slow the climb in long-term rates.

The economic challenges from the COVID-19 pandemic impact all our SBUs. From a credit perspective, while our outlook has improved as a result of better-than-expected growth over the past two quarters, we continue to expect that our loan portfolios will be negatively impacted by the constrained economic activity associated with measures taken to contain the spread of the infection, partially mitigated by large-scale government support programs targeting both individuals and businesses. Deposit growth is likely to decelerate as the flow of government support payments to households and businesses slows. The persistent low interest environment is expected to continue to have a negative impact on the net interest margins for all our SBUs.

For Canadian Personal and Business Banking, mortgage demand growth could decelerate slightly due to the new B-20 rules and affordability constraints, but will continue to remain well supported by low rates, while we expect to see a modest return to growth in non-mortgage credit demand as vaccination rates increase and pandemic-related constraints begin to ease. Continued demand for business lending products is anticipated as small businesses look to weather the impact of the economic slowdown.

Our Canadian and U.S. wealth management businesses are expected to benefit from a further economic recovery, with investors looking for alternatives to low rates on savings deposits.

Our Capital Markets business is expected to benefit from merger and acquisition activity as corporate consolidations increase as a result of the pandemic, as well as increased equity issuance, but could be negatively impacted by lower corporate bond issuance and lower trading revenues from the highs in 2020.

Loan demand in our Canadian and U.S. commercial banking businesses moderated in recent quarters, but will be supported by further economic recovery in the second half of the calendar year.

The economic outlook described above reflects numerous assumptions and uncertainties regarding the economic impact of the COVID-19 pandemic, which will ultimately depend on the speed at which the vaccination programs can be completed and the extent to which they will be effective at controlling both existing and emerging variants of the virus, and the ability of governments, businesses and health-care systems to effectively limit the epidemiological and economic impacts of the current and future resurgences of the virus, including its variants, in the intervening period. The extent to which public health policies restrict economic activity, and the level and effectiveness of government support during this intervening period are material to our expectations for the scale and timing of a further economic rebound later in calendar 2021. Expectations reflect currently available information and are subject to change as new information on transmissibility and epidemiology becomes available. As a result, actual experience may differ materially from expectations.

 

CIBC SECOND QUARTER 2021     3  


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While we continue to support our clients through the pandemic, the need for and level of our client relief programs has reduced over the recent quarters. See “CIBC client relief programs in response to COVID-19” and “Government lending programs in response to COVID-19” for further details regarding the client relief and government support programs we are involved in. COVID-19 and the low interest rate environment continue to impact our business and results of operations. See “Financial results review” and “Strategic business units overview” for further details. Despite these pressures, our financial condition and our regulatory capital and liquidity positions continue to be strong. See “Capital management” and “Liquidity risk” for further details. The impact of the pandemic on our risk environment is discussed in “Top and emerging risks”. Changes in the level of economic uncertainty arising from the pandemic continue to impact key accounting estimates and assumptions, particularly the estimation of ECLs. See “Accounting and control matters”, as well as Note 2 and Note 6 to our interim consolidated financial statements for further details.

Significant events

Sale of FirstCaribbean International Bank Limited

On November 8, 2019, we announced that we had entered into a definitive agreement to sell 66.73% of the outstanding shares of FirstCaribbean International Bank Limited (CIBC FirstCaribbean) to GNB Financial Group Limited (GNB), subject to regulatory approvals, as discussed in Note 4 to the consolidated financial statements included in our 2020 Annual Report.

As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our revised expectations concerning the likelihood and timing of a potential transaction, we discontinued the application of held for sale accounting of CIBC FirstCaribbean in the fourth quarter of 2020 and recorded a goodwill impairment charge of $220 million. On February 3, 2021, we announced that the proposed sale of CIBC FirstCaribbean to GNB did not receive approval from CIBC FirstCaribbean’s regulators and that the transaction will not proceed.

Financial results review

Reported net income for the quarter was $1,651 million, compared with $392 million for the same quarter last year, and $1,625 million for the prior quarter.

Adjusted net income(1) for the quarter was $1,666 million, compared with $441 million for the same quarter last year, and $1,640 million for the prior quarter.

Reported diluted earnings per share (EPS) for the quarter was $3.55, compared with $0.83 for the same quarter last year, and $3.55 for the prior quarter.

Adjusted diluted EPS(1) for the quarter was $3.59, compared with $0.94 for the same quarter last year, and $3.58 for the prior quarter.

In the current quarter, the following item of note increased non-interest expenses by $20 million, decreased income taxes by $5 million and decreased net income by $15 million:

 

$20 million ($15 million after-tax) amortization of acquisition-related intangible assets ($13 million after-tax in U.S. Commercial Banking and Wealth Management and $2 million after-tax in Corporate and Other).

Net interest income(2)

Net interest income was down $15 million or 1% from the same quarter last year, primarily due to narrower margins, the impact of foreign exchange translation, one fewer day this quarter and interest income related to the settlement of certain income tax matters in the same quarter last year, partially offset by volume growth across our businesses and higher trading income.

Net interest income was down $92 million or 3% from the prior quarter, primarily due to fewer days in the current quarter and lower trading income, partially offset by volume growth across our businesses.

Net interest income for the six months ended April 30, 2021 was up $63 million or 1% from the same period in 2020, primarily due to volume growth across our businesses and higher trading income, partially offset by narrower margins as a result of changes in the interest rate environment, lower revenue from Treasury and the impact of foreign exchange translation.

Non-interest income(2)

Non-interest income was up $369 million or 20% from the same quarter last year, primarily due to higher underwriting and advisory fees and higher fee-based revenue driven by higher average AUA and AUM reflecting market appreciation. The previous period also included the impact of unfavourable credit valuation adjustments (CVA) and funding valuation adjustments (FVA).

Non-interest income was up $61 million or 3% from the prior quarter, primarily due to higher underwriting and advisory fees, partially offset by lower trading income.

Non-interest income for the six months ended April 30, 2021 was up $399 million or 10% from the same period in 2020, primarily due to higher fee-based revenue driven by higher average AUM and AUA, underwriting and advisory fees and credit fees. The previous period also included the impact of unfavourable CVA and FVA.

 

(1)

Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section.

(2)

Trading activities and related risk management strategies can periodically shift trading income between net interest income and non-interest income. Therefore, we view total trading income as the most appropriate measure of trading performance.

 

4   CIBC SECOND QUARTER 2021


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Provision for credit losses

    

For the three

months ended

          

For the six

months ended

 

$ millions

  

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30 (1)

          

2021

Apr. 30

   

2020

Apr. 30 (1)

 

Provision for (reversal of) credit losses – impaired

                 

Canadian Personal and Business Banking

   $      206     $ 109     $ 201        $ 315     $ 390  

Canadian Commercial Banking and Wealth Management

     (8     19       62          11       96  

U.S. Commercial Banking and Wealth Management

     23       48       20          71       36  

Capital Markets

     8       42       43          50       41  

Corporate and Other

     17       18       17          35       24  
     246       236       343          482       587  

Provision for (reversal of) credit losses – performing

                 

Canadian Personal and Business Banking

     (141     (55     439          (196     461  

Canadian Commercial Banking and Wealth Management

     (10     14       124          4       125  

U.S. Commercial Banking and Wealth Management

     (35     (3     210          (38     209  

Capital Markets

     (19     (37     193          (56     189  

Corporate and Other

     (9     (8     103          (17     102  
       (214     (89     1,069          (303     1,086  
     $ 32     $     147     $     1,412        $      179     $     1,673  
(1)

Certain prior period information has been revised. See the “External reporting changes” section for additional details.

Provision for credit losses was down $1,380 million or 98% from the same quarter last year. Provision for credit losses on performing loans was down $1,283 million as the same quarter last year included increases to reflect the unfavourable change in our economic outlook at the onset of the COVID-19 pandemic, while the current quarter included a reversal resulting from an improvement in our economic outlook as well as higher transfers of performing loans to impaired mainly in Canadian Personal and Business Banking. Provision for credit losses on impaired loans was down $97 million from the same quarter last year, primarily due to lower impairments net of reversals in Canadian Commercial Banking and Wealth Management, and Capital Markets.

Provision for credit losses was down $115 million or 78% from the prior quarter. The reversal of provision for credit losses on performing loans was up $125 million mainly due to further favourable changes in our economic outlook impacting most of our SBUs and higher transfers of performing loans to impaired in Canadian Personal and Business Banking. Provision for credit losses on impaired loans was comparable with the prior quarter.

Provision for credit losses for the six months ended April 30, 2021 was down $1,494 million or 89% from the same period in 2020. Provision for credit losses on both performing loans and impaired loans was down $1,389 million and $105 million, respectively, as the same period last year was adversely impacted by the onset of the COVID-19 pandemic, while the current period reflected an improvement in our economic outlook.

Non-interest expenses

Non-interest expenses were up $52 million or 2% from the same quarter last year, primarily due to higher performance-based compensation, partially offset by a favourable commodity tax adjustment. The prior year also included a goodwill impairment charge, shown as an item of note.

Non-interest expenses were up $30 million or 1% from the prior quarter, primarily due to higher spending on strategic initiatives and performance-based compensation, partially offset by a favourable commodity tax adjustment.

Non-interest expenses for the six months ended April 30, 2021 were down $287 million or 5% from the same period in 2020, as the prior period included a restructuring charge primarily related to employee severance, shown as an item of note. The current period included a favourable commodity tax adjustment.

Income taxes

Income tax expense was up $423 million or 604% from the same quarter last year, and up $28 million or 6% from the prior quarter, primarily due to higher income.

Income tax expense for the six months ended April 30, 2021 was up $571 million or 148% from the same period in 2020, primarily due to higher income.

In prior years, the Canada Revenue Agency (CRA) issued reassessments disallowing the deduction of Enron settlement payments and related legal expenses (the “Enron expenses”). In January 2019, CIBC entered into a settlement agreement (the “Agreement”) with the CRA that provides certainty with respect to the portion of the Enron expenses deductible in Canada. The Agreement resulted in the recognition of a net $38 million tax recovery in the first quarter of 2019. This recovery was determined after taking into account taxable refund interest in Canada and also the portion of the Enron expenses that are expected to be deductible in the United States (the “U.S. deduction”). The U.S. deduction has not been agreed to by the Internal Revenue Service. It is possible that adjustments may be required to the amount of tax benefits recognized in the U.S.

The CRA has reassessed CIBC approximately $1,115 million of additional income tax by denying the tax deductibility of certain 2011 to 2015 Canadian corporate dividends on the basis that they were part of a “dividend rental arrangement”. In addition, the CRA has proposed to reassess $305 million for 2016. The dividends that were subject to the reassessments and proposed reassessment for 2016 are similar to those prospectively addressed by the rules in the 2015 and 2018 Canadian federal budgets. It is possible that subsequent years may be reassessed for similar activities. CIBC is confident that its tax filing positions were appropriate and intends to defend itself vigorously. Accordingly, no amounts have been accrued in the interim consolidated financial statements.

 

CIBC SECOND QUARTER 2021     5  


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Foreign exchange

The following table provides the estimated impact of U.S. dollar translation on key lines of our interim consolidated statement of income, as a result of changes in average exchange rates.

 

    

For the three

months ended

          

For the six

months ended

 
   

$ millions, except per share amounts

  

Apr. 30, 2021

vs.

Apr. 30, 2020

    

Apr. 30, 2021

vs.

Jan. 31, 2021

          

Apr. 30, 2021

vs.

Apr. 30, 2020

 

Estimated increase (decrease) in:

                            

Total revenue

   $ (109    $ (26      $ (137

Provision for credit losses

     3        1          2  

Non-interest expenses

     (50      (12        (63

Income taxes

     (8      (2        (10

Net income

     (54      (13        (66

Impact on EPS:

              

Basic

   $     (0.12    $     (0.03      $     (0.15

Diluted

     (0.12      (0.03        (0.15

Average USD depreciation relative to CAD

     (9.3 ) %       (2.4 ) %         (6.0 ) % 

Review of quarterly financial information

 

$ millions, except per share amounts, for the three months ended          2021                          2020            2019  
           Apr. 30     Jan. 31     Oct. 31     Jul. 31     Apr. 30     Jan. 31     Oct. 31     Jul. 31  

Revenue

                   

Canadian Personal and Business Banking (1)

  $ 1,941     $ 2,025     $ 1,997     $ 1,910     $ 1,936     $ 2,079     $ 2,095     $ 2,108  

Canadian Commercial Banking and Wealth Management

    1,135       1,088       1,028       1,013       1,025       1,055       1,026       1,019  

U.S. Commercial Banking and Wealth Management (1)(2)

    532       561       519       512       511       501       492       494  

Capital Markets (1)(2)

    1,194       1,174       934       1,146       967       1,006       870       884  

Corporate and Other (1)(2)

    130       115       122       127       139       214       289       227  

Total revenue

  $     4,932     $     4,963     $     4,600     $     4,708     $     4,578     $     4,855     $     4,772     $     4,732  

Net interest income

  $ 2,747     $ 2,839     $ 2,792     $ 2,729     $ 2,762     $ 2,761     $ 2,801     $ 2,694  

Non-interest income

    2,185       2,124       1,808       1,979       1,816       2,094       1,971       2,038  

Total revenue

    4,932       4,963       4,600       4,708       4,578       4,855       4,772       4,732  

Provision for credit losses

    32       147       291       525       1,412       261       402       291  

Non-interest expenses

    2,756       2,726       2,891       2,702       2,704       3,065       2,838       2,670  

Income before income taxes

    2,144       2,090       1,418       1,481       462       1,529       1,532       1,771  

Income taxes

    493       465       402       309       70       317       339       373  

Net income

  $ 1,651     $ 1,625     $ 1,016     $ 1,172     $ 392     $ 1,212     $ 1,193     $ 1,398  

Net income (loss) attributable to:

                   

Non-controlling interests

  $ 4     $ 4     $ 1     $ 2     $ (8   $ 7     $ 8     $ 6  

Equity shareholders

    1,647       1,621       1,015       1,170       400       1,205       1,185       1,392  

EPS

  

– basic

  $ 3.56     $ 3.56     $ 2.21     $ 2.56     $ 0.83     $ 2.64     $ 2.59     $ 3.07  
    

– diluted

    3.55       3.55       2.20       2.55       0.83       2.63       2.58       3.06  
(1)

Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(2)

Capital Markets revenue and income taxes are reported on a TEB with an equivalent offset in the revenue and income taxes of Corporate and Other.

Our quarterly results are modestly affected by seasonal factors. The second quarter has fewer days as compared with the other quarters, generally leading to lower earnings. The summer months (July – third quarter and August – fourth quarter) typically experience lower levels of market activity, which affects our brokerage, investment management, and Capital Markets activities.

Revenue

Revenue in our lending and deposit-taking businesses are generally driven by the interest rate environment, volume growth and fees related to client transaction activity. Our wealth management businesses are driven by market conditions and net sales activity impacting AUA and AUM. Capital Markets revenue is also influenced, to a large extent, by market conditions affecting client trading and underwriting activity. The COVID-19 pandemic beginning in the second quarter of 2020 and the lower interest rate environment continue to impact revenue for all our SBUs.

Canadian Personal and Business Banking revenue has been negatively impacted by the lower interest rate environment and lower client transaction activity as a result of the COVID-19 pandemic, partially offset by volume growth.

Canadian Commercial Banking and Wealth Management has benefitted from volume growth in both loans and deposits. While loan growth has been muted as a result of the economic uncertainty arising from the pandemic, it is starting to show signs of a recovery. This has been partially offset by the lower interest rate environment. Wealth management AUA and AUM growth has been driven by a continued market recovery and strong sales momentum subsequent to the market volatility noted in the second quarter of 2020.

U.S. Commercial Banking and Wealth Management revenue has benefitted from volume growth and growth in fee income. Wealth management AUA and AUM growth has been driven by a continued market recovery and strong sales momentum subsequent to the market volatility noted in the second quarter of 2020. In addition, deposit growth has outpaced loan growth resulting in net interest margin expansion in the past several quarters.

The second and fourth quarters of 2020 included lower trading revenue in Capital Markets.

Corporate and Other included the impact of changes relating to our adoption of IFRS 16 “Leases” commencing in the first quarter of 2020 that were largely offset in non-interest expenses. Commencing in the second quarter of 2020, the COVID-19 pandemic led to excess liquidity costs that negatively impacted revenue, while the interest rate environment and narrower margins have negatively impacted revenue in international banking. The fourth quarter of 2019 included interest income related to the settlement of certain income tax matters.

 

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Provision for credit losses

Provision for credit losses is dependent upon the credit cycle in general, on the credit performance of the loan portfolios, and changes in economic outlook. As a result of the impact of the COVID-19 pandemic beginning in the second quarter of 2020, our loan portfolios were negatively impacted by the decline in economic activity associated with physical distancing measures as well as a decline in consumer spending, mitigated to an extent by large-scale government support and relief programs targeting both individuals and businesses. There is considerable judgment involved in the estimation of credit losses in the current environment. The ultimate impact of the COVID-19 pandemic will depend on the speed at which the vaccination programs currently underway can be administered on a mass scale to effectively limit the spread of COVID-19 and its related variants, and the ability of governments, businesses and health-care systems to effectively limit the epidemiological and economic impacts of expected resurgences of the virus, including variants thereof, in the intervening period. The extent to which public health measures restrict economic activity and the level and effectiveness of government support during this intervening period are material to our expectations for a continued economic rebound in 2021 and our resulting provision for credit losses.

The significant increase in provision for credit losses on performing loans in the second and, to a lesser extent, third quarters of 2020 reflect the onset of the COVID-19 pandemic and continued pressure on oil prices, and impacted all our SBUs. The first half of 2021 reflects a moderate improvement in our outlook. We also recognized provisions on performing loans throughout 2019, reflective of the impact of certain unfavourable changes to our economic outlook over that period.

In Canadian Personal and Business Banking, the fourth quarter of 2019 included higher provisions on impaired loans in the personal lending portfolio. The third and fourth quarters of 2020 and the first quarter of 2021 included lower insolvencies and write-offs in credit cards. The decrease in insolvencies was in line with the national Canadian trend. The low level of write-offs was impacted by the assistance offered to clients from our payment deferral programs, lower client spending as well as government support. The second quarter of 2021 included higher write-offs in credit cards, mainly attributable to a relatively small segment of client balances that were previously in the payment deferral programs, that continued to underperform and eventually were written off after exiting the programs.

In Canadian Commercial Banking and Wealth Management, the first and third quarters of 2020 and the fourth quarter of 2019 included provisions on one fraud-related impairment.

In U.S. Commercial Banking and Wealth Management, the first quarters of 2020 and 2021, the second half of 2020 and the third quarter of 2019 included higher provisions on impaired loans. Impaired loan provisions in the U.S. remain elevated.

In Capital Markets, the second and third quarters of 2020, and the second half of 2019 included higher provisions on impaired loans in the oil and gas sector.

In Corporate and Other, provisions on impaired loans remained low and stable over the past two years.

Non-interest expenses

Non-interest expenses have fluctuated over the period largely due to changes in employee compensation expenses, investments in strategic initiatives and movement in foreign exchange rates. The fourth quarter of 2019 and the second and fourth quarters of 2020 included goodwill impairment charges related to our controlling interest in CIBC FirstCaribbean. The fourth quarter of 2019 and the third quarter of 2020 included increases in legal provisions in Corporate and Other, both shown as items of note. The first quarter of 2020 included a restructuring charge associated with ongoing efforts to transform our cost structure and simplify our bank. The fourth quarter of 2020 included a charge related to the consolidation of our real estate portfolio as a result of our upcoming move to our new global headquarters and a gain as a result of plan amendments related to pension and other post-employment plans.

Income taxes

Income taxes vary with changes in income subject to tax, and the jurisdictions in which the income is earned. Taxes can also be affected by the impact of significant items and the level of tax-exempt income.

Non-GAAP measures

We use a number of financial measures to assess the performance of our business lines as described below. Some measures are calculated in accordance with GAAP (IFRS), while other measures do not have a standardized meaning under GAAP, and accordingly, these measures may not be comparable to similar measures used by other companies. Investors may find these non-GAAP measures useful in understanding how management views underlying business performance.

Management assesses results on a reported and adjusted basis and considers both as useful measures of performance. Adjusted results remove items of note from reported results and are used to calculate our adjusted measures. Adjusted measures represent non-GAAP measures.

For a more detailed discussion on our non-GAAP measures, see page 16 of our 2020 Annual Report.

 

CIBC SECOND QUARTER 2021     7  


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The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results.

 

    

For the three

months ended

          

For the six

months ended

 

$ millions

  

2021

Apr. 30

    

2021

Jan. 31

    

2020

Apr. 30

          

2021

Apr. 30

    

2020

Apr. 30

 

Operating results – reported

                    

Total revenue

   $     4,932      $     4,963      $     4,578        $     9,895      $     9,433  

Provision for credit losses

     32        147        1,412          179        1,673  

Non-interest expenses

     2,756        2,726        2,704          5,482        5,769  

Income before income taxes

     2,144        2,090        462          4,234        1,991  

Income taxes

     493        465        70          958        387  

Net income

     1,651        1,625        392          3,276        1,604  

Net income (loss) attributable to non-controlling interests

     4        4        (8        8        (1

Net income attributable to equity shareholders

     1,647        1,621        400          3,268        1,605  

Diluted EPS ($)

   $ 3.55      $ 3.55      $ 0.83        $ 7.10      $ 3.46  

Impact of items of note (1)

                    

Non-interest expenses

                    

Amortization of acquisition-related intangible assets (2)

   $ (20    $ (20    $ (29      $ (40    $ (56

Restructuring charge (3)

                                   (339

Goodwill impairment (4)

                   (28               (28

Impact of items of note on non-interest expenses

     (20      (20      (57        (40      (423

Total pre-tax impact of items of note on net income

     20        20        57          40        423  

Amortization of acquisition-related intangible assets (2)

     5        5        8          10        14  

Restructuring charge (3)

                                   89  

Impact of items of note on income taxes

     5        5        8          10        103  

Total after-tax impact of items of note on net income

     15        15        49          30        320  

Impact of items of note on diluted EPS ($) (5)

   $ 0.04      $ 0.03      $ 0.11        $ 0.07      $ 0.72  

Operating results – adjusted (6)

                    

Total revenue (7)

   $ 4,932      $ 4,963      $ 4,578        $ 9,895      $ 9,433  

Provision for credit losses

     32        147        1,412          179        1,673  

Non-interest expenses

     2,736        2,706        2,647          5,442        5,346  

Income before income taxes

     2,164        2,110        519          4,274        2,414  

Income taxes

     498        470        78          968        490  

Net income

     1,666        1,640        441          3,306        1,924  

Net income (loss) attributable to non-controlling interests

     4        4        (8        8        (1

Net income attributable to equity shareholders

     1,662        1,636        449          3,298        1,925  
   

Adjusted diluted EPS ($)

   $ 3.59      $ 3.58      $ 0.94        $ 7.17      $ 4.18  
(1)

Reflects the impact of items of note on our adjusted results as compared with our reported results.

(2)

Amortization of acquisition-related intangible assets is recognized in the SBU of the acquired business or Corporate and Other. A summary is provided in the table below.

 

 

   

Canadian Personal and Business Banking (pre-tax)

             $                $            –                $            (2                $           –                $           (4

Canadian Personal and Business Banking (after-tax)

                   (1               (3

U.S. Commercial Banking and Wealth Management (pre-tax)

     (18      (17      (23        (35      (45

U.S. Commercial Banking and Wealth Management (after-tax)

     (13      (12      (17        (25      (33

Corporate and Other (pre-tax)

     (2      (3      (4        (5      (7

Corporate and Other (after-tax)

     (2      (3      (3        (5      (6
(3)

Restructuring charge associated with ongoing efforts to transform our cost structure and simplify our bank. This charge consists primarily of employee severance and related costs and was recognized in Corporate and Other.

(4)

Goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean recognized in Corporate and Other.

(5)

Includes the impact of rounding differences between diluted EPS and adjusted diluted EPS.

(6)

Adjusted to exclude the impact of items of note.

(7)

Excludes a TEB adjustment of $51 million (January 31, 2021: $54 million; April 30, 2020: $46 million) and $105 million for the six months ended April 30, 2021 (April 30, 2020: $95 million). Our adjusted efficiency ratio is calculated on a TEB.

The table below provides a summary of adjusted results by SBU(1).

 

$ millions, for the three months ended  

Canadian

Personal and

Business

Banking

   

Canadian

Commercial

Banking

and Wealth

Management

   

U.S.

Commercial
Banking

and Wealth

Management

    

Capital

Markets

    

Corporate

and Other

    

CIBC

Total

 

2021

   Reported net income (loss)   $ 603     $ 399     $ 216      $ 495      $ (62    $ 1,651  
Apr. 30    After-tax impact of items of note (1)                 13               2        15  
     Adjusted net income (loss) (2)   $ 603     $ 399     $ 229      $ 495      $ (60    $ 1,666  

2021

   Reported net income (loss)   $ 652     $ 354     $ 188      $ 493      $ (62    $ 1,625  

Jan. 31

   After-tax impact of items of note (1)                 12               3        15  
     Adjusted net income (loss) (2)   $ 652     $ 354     $ 200      $ 493      $ (59    $ 1,640  

2020

   Reported net income (loss)   $ 163     $ 206     $ 15      $ 177      $ (169    $ 392  

Apr. 30 (3)

   After-tax impact of items of note (1)     1             17               31        49  
     Adjusted net income (loss) (2)   $ 164     $ 206     $ 32      $ 177      $ (138    $ 441  
$ millions, for the six months ended                                             

2021

   Reported net income (loss)   $ 1,255     $ 753     $ 404      $ 988      $ (124    $ 3,276  
Apr. 30    After-tax impact of items of note (1)                 25               5        30  
     Adjusted net income (loss) (2)   $     1,255     $ 753     $ 429      $ 988      $ (119    $ 3,306  

2020

   Reported net income (loss)   $ 738     $ 542     $ 180      $ 555      $ (411    $ 1,604  

Apr. 30 (3)

   After-tax impact of items of note (1)     3             33               284        320  
     Adjusted net income (loss) (2)   $     741     $     542     $     213      $     555      $     (127    $     1,924  
(1)

Reflects the impact of items of note described above.

(2)

Non-GAAP measure.

(3)

Certain prior period information has been revised. See the “External reporting changes” section for additional details.

 

8   CIBC SECOND QUARTER 2021


Table of Contents

Strategic business units overview

CIBC has four SBUs – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth Management, and Capital Markets. These SBUs are supported by the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture and Brand, Finance and Enterprise Strategy, as well as other support groups, which all form part of Corporate and Other. The expenses of these functional and support groups are generally allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic investments, as well as other income statement and balance sheet items not directly attributable to the business lines. The key methodologies and assumptions used in reporting the financial results of our SBUs are provided on page 19 of our 2020 Annual Report.

External reporting changes were made in the first quarter of 2021, which affected the results of our SBUs. See the “External reporting changes” section for additional details.

Canadian Personal and Business Banking

Canadian Personal and Business Banking provides personal and business clients across Canada with financial advice, products and services through banking centre, digital, mobile and remote channels.

Results(1)

 

    

For the three

months ended

          

For the six

months ended

 

$ millions

  

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30 (2)

          

2021

Apr. 30

   

2020

Apr. 30 (2)

 

Revenue

   $       1,941     $       2,025     $       1,936        $     3,966     $       4,015  

Provision for (reversal of) credit losses

                 

Impaired

     206       109       201          315       390  

Performing

     (141     (55     439          (196     461  

Total provision for credit losses

     65       54       640          119       851  

Non-interest expenses

     1,058       1,086       1,074          2,144       2,160  

Income before income taxes

     818       885       222          1,703       1,004  

Income taxes

     215       233       59          448       266  

Net income

   $ 603     $ 652     $ 163        $       1,255     $ 738  

Net income attributable to:

                 

Equity shareholders

   $ 603     $ 652     $ 163        $ 1,255     $ 738  

Efficiency ratio

     54.5  %      53.6  %      55.5  %         54.1  %      53.8  % 

Return on equity (3)

     37.9  %      39.9  %      9.8  %         38.9  %      22.3  % 

Average allocated common equity (3)

   $ 6,530     $ 6,480     $ 6,734        $ 6,504     $ 6,641  

Full-time equivalent employees

     12,525       12,594       12,399          12,525       12,399  
(1)

For additional segmented information, see the notes to the interim consolidated financial statements.

(2)

Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3)

For additional information, see the “Non-GAAP measures” section.

Financial overview

Net income for the quarter was $603 million, up $440 million from the same quarter last year, primarily due to a lower provision for credit losses.

Net income was down $49 million from the prior quarter, primarily due to lower revenue, partially offset by lower non-interest expenses.

Net income for the six months ended April 30, 2021 was $1,255 million, up $517 million from the same period in 2020, primarily due to a lower provision for credit losses, partially offset by lower revenue.

Revenue

Revenue was up $5 million from the same quarter last year, primarily due to volume growth and higher fees, partially offset by narrower margins largely as a result of changes in the interest rate environment and the impact of one fewer day in the current quarter.

Revenue was down $84 million or 4% from the prior quarter, primarily due to fewer days in the current quarter and lower fee income.

Revenue for the six months ended April 30, 2021 was down $49 million or 1% from the same period in 2020, primarily due to narrower margins largely as a result of changes in the interest rate environment, lower fee income, and the impact of one fewer day in the current period, partially offset by volume growth.

Provision for credit losses

Provision for credit losses was down $575 million from the same quarter last year. The current quarter included a provision reversal on performing loans due to a favourable change in our economic outlook and the transfer of accounts to impaired, while the same quarter last year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was comparable with the same quarter last year.

Provision for credit losses was up $11 million from the prior quarter. Provision reversal on performing loans was up due to a favourable change in our economic outlook, and higher transfers of performing loans to impaired. Provision for credit losses on impaired loans was up due to higher write-offs in credit cards and a model parameter update in the residential mortgage portfolio.

Provision for credit losses for the six months ended April 30, 2021 was down $732 million from the same period in 2020. Provision for credit losses on both performing loans and impaired loans was down, as the same period in 2020 was adversely impacted by the onset of the COVID-19 pandemic.

 

CIBC SECOND QUARTER 2021     9  


Table of Contents

Non-interest expenses

Non-interest expenses were down $16 million or 1% from the same quarter last year and down $28 million or 3% from the prior quarter, primarily due to a favourable commodity tax adjustment, partially offset by higher spending on strategic initiatives and employee-related compensation.

Non-interest expenses for the six months ended April 30, 2021 were down $16 million or 1% from the same period in 2020, primarily due to a favourable commodity tax adjustment, partially offset by higher spending on strategic initiatives and employee-related compensation.

Income taxes

Income taxes were up $156 million from the same quarter last year, primarily due to higher income.

Income taxes were down $18 million from the prior quarter, primarily due to lower income.

Income taxes for the six months ended April 30, 2021 were up $182 million from the same period in 2020, primarily due to higher income.

Canadian Commercial Banking and Wealth Management

Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented banking and wealth management services to middle-market companies, entrepreneurs, high-net-worth individuals and families across Canada, as well as asset management services to institutional investors.

Results(1)

 

    

For the three

months ended

          

For the six

months ended

 
$ millions   

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30

          

2021

Apr. 30

   

2020

Apr. 30

 

Revenue

                 

Commercial banking

   $     435     $ 428     $ 414        $ 863     $ 837  

Wealth management

     700       660       611          1,360       1,243  

Total revenue

     1,135       1,088       1,025          2,223           2,080  

Provision for (reversal of) credit losses

                 

Impaired

     (8     19       62          11       96  

Performing

     (10     14       124          4       125  

Total provision for (reversal of) credit losses

     (18     33       186          15       221  

Non-interest expenses

     608       572       559          1,180       1,120  

Income before income taxes

     545       483       280              1,028       739  

Income taxes

     146       129       74          275       197  

Net income

   $ 399     $ 354     $ 206        $ 753     $ 542  

Net income attributable to:

                 

Equity shareholders

   $ 399     $ 354     $ 206        $ 753     $ 542  

Efficiency ratio

     53.5  %      52.6  %      54.5  %         53.1  %      53.8  % 

Return on equity (2)

     24.4  %      21.4  %      13.0  %         22.9  %      17.2  % 

Average allocated common equity (2)

   $     6,704     $     6,568     $     6,448        $     6,635     $     6,336  

Full-time equivalent employees

     5,136       5,036       5,080          5,136       5,080  
(1)

For additional segmented information, see the notes to the interim consolidated financial statements.

(2)

For additional information, see the “Non-GAAP measures” section.

Financial overview

Net income for the quarter was $399 million, up $193 million from the same quarter last year, and up $45 million from the prior quarter, primarily due to a provision reversal compared with a provision for credit losses in the prior year and higher revenue, partially offset by higher non-interest expenses.

Net income for the six months ended April 30, 2021 was $753 million, up $211 million from the same period in 2020, primarily due to a provision reversal in the current period compared with a provision for credit losses in the prior period and higher revenue, partially offset by higher non-interest expenses.

Revenue

Revenue was up $110 million or 11% from the same quarter last year.

Commercial banking revenue was up $21 million, primarily due to higher fees and volume growth, partially offset by narrower margins and the impact of one fewer day in the current quarter.

Wealth management revenue was up $89 million, primarily due to higher fee-based revenue driven by higher average AUA and AUM reflecting market appreciation and net sales, and higher commission revenue from increased client activity.

Revenue was up $47 million or 4% from the prior quarter.

Commercial banking revenue was up $7 million, primarily due to wider margins, higher fees and volume growth, partially offset by the impact of fewer days in the current quarter.

Wealth management revenue was up $40 million, primarily due to higher commission revenue from increased client activity and higher fee-based revenue driven by higher average AUA and AUM reflecting market appreciation and net sales.

Revenue for the six months ended April 30, 2021 was up $143 million or 7% from the same period in 2020.

Commercial banking revenue was up $26 million, primarily due to higher fees and volume growth, partially offset by narrower margins and the impact of one fewer day in the current period.

Wealth management revenue was up $117 million, primarily due to higher fee-based revenue driven by higher average AUA and AUM reflecting market appreciation and net sales, and higher commission revenue from increased client activity.

 

10   CIBC SECOND QUARTER 2021


Table of Contents

Provision for (reversal of) credit losses

Provision for credit losses was down $204 million from the same quarter last year. The current quarter included a provision reversal on performing loans due to a favourable change in our economic outlook, while the same quarter last year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was down due to lower provisions in the business services, and retail and wholesale sectors.

Provision for credit losses was down $51 million from the prior quarter. The current quarter included a provision reversal on performing loans due to a favourable change in our economic outlook, while the prior quarter included a provision for credit losses reflective of unfavourable credit migration. The current quarter also included a provision reversal on impaired loans while the prior quarter included a provision for credit losses relating to the education, health and social services sectors.

Provision for credit losses for the six months ended April 30, 2021 was down $206 million from the same period in 2020. Provision for credit losses on both performing loans and impaired loans were down, as the same period in 2020 was adversely impacted by the onset of the COVID-19 pandemic.

Non-interest expenses

Non-interest expenses were up $49 million or 9% from the same quarter last year, and up $36 million or 6% from the prior quarter, primarily due to higher performance-based compensation.

Non-interest expenses for the six months ended April 30, 2021 were up $60 million or 5% from the same period in 2020, primarily due to higher performance-based compensation.

Income taxes

Income taxes were up $72 million from the same quarter last year and up $17 million from the prior quarter, primarily due to higher income.

Income taxes for the six months ended April 30, 2021 were up $78 million from the same period in 2020, primarily due to higher income.

U.S. Commercial Banking and Wealth Management

U.S. Commercial Banking and Wealth Management provides commercial banking and private wealth services across the U.S., as well as personal and small business banking services in four U.S. Midwestern markets and focuses on middle-market and mid-corporate companies and high-net worth individuals and families.

Results(1)

 

    

For the three

months ended

          

For the six

months ended

 
$ millions   

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30 (2)

          

2021

Apr. 30

   

2020

Apr. 30 (2)

 

Revenue

                 

Commercial banking

   $ 347     $ 381     $ 357        $ 728     $ 697  

Wealth management (4)

     185       180       154          365       315  

Total revenue (3)

     532       561       511          1,093       1,012  

Provision for (reversal of) credit losses

                 

Impaired

     23       48       20          71       36  

Performing

     (35     (3     210          (38     209  

Total provision for (reversal of) credit losses

     (12     45       230          33       245  

Non-interest expenses

     271       280       291          551       589  

Income before income taxes

     273       236       (10        509       178  

Income taxes

     57       48       (25        105       (2

Net income

   $ 216     $ 188     $ 15        $ 404     $ 180  

Net income attributable to:

                 

Equity shareholders

   $ 216     $ 188     $ 15        $ 404     $ 180  

Efficiency ratio

     51.0  %      49.9  %      57.0  %         50.4  %      58.2  % 

Return on equity (5)

     9.9  %      8.2  %      0.6  %         9.0  %      4.0  % 

Average allocated common equity (5)

   $     8,974     $     9,105     $     9,316        $     9,041     $     9,083  

Full-time equivalent employees

     2,105       2,090       2,029          2,105       2,029  
(1)

For additional segmented information, see the notes to the interim consolidated financial statements.

(2)

Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3)

Included $5 million of income relating to the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank for the quarter ended April 30, 2021 (January 31, 2021: $4 million; April 30, 2020: $4 million) and $9 million for the six months ended April 30, 2021 (April 30, 2020: $10 million).

(4)

Includes revenue related to the U.S. Paycheck Protection Program.

(5)

For additional information, see the “Non-GAAP measures” section.

Financial overview

Net income for the quarter was $216 million, up $201 million from the same quarter last year, primarily due to a provision reversal in the current quarter compared with a provision for credit losses in the prior year.

Net income was up $28 million from the prior quarter, primarily due to a provision reversal in the current quarter compared with a provision for credit losses in the prior quarter, partially offset by lower revenue.

Net income for the six months ended April 30, 2021 was $404 million, up $224 million from the same period in 2020, primarily due to lower provision for credit losses and higher revenue.

Revenue

Revenue was up $21 million or 4% from the same quarter last year as the negative impact of foreign exchange translation was more than offset by higher U.S. dollar revenue.

Commercial banking revenue was down $10 million, as higher U.S. dollar revenue was more than offset by the impact of foreign exchange translation. The higher U.S. dollar revenue was the result of volume growth and higher fees, partially offset by narrower margins.

Wealth management revenue was up $31 million, primarily due to higher U.S. dollar revenue from higher fees driven by higher average AUA and AUM reflecting market appreciation and net sales, volume growth and other fees, partially offset by the impact of foreign exchange translation.

 

CIBC SECOND QUARTER 2021     11  


Table of Contents

Revenue was down $29 million or 5% from the prior quarter as a result of the negative impact of foreign exchange translation and lower U.S. dollar revenue.

Commercial banking revenue was down $34 million, primarily due to lower U.S. dollar revenue from the impact of fewer days in the quarter and lower syndication fees, and the impact of foreign exchange translation.

Wealth management revenue was up $5 million, primarily due to higher U.S. dollar revenue from higher fees driven by higher average AUA and AUM reflecting market appreciation and net sales, partially offset by the impact of foreign exchange translation.

Revenue for the six months ended April 30, 2021 was up $81 million or 8% from the same period in 2020, as a result of higher U.S. dollar revenue, partially offset by the negative impact of foreign exchange translation.

Commercial banking revenue was up $31 million, primarily due to higher U.S. dollar revenue from volume growth and higher fees, partially offset by the impact of foreign exchange translation.

Wealth management revenue was up $50 million, primarily due to higher U.S. dollar revenue from higher fees driven by higher average AUA and AUM reflecting market appreciation and net sales, and volume growth, partially offset by the impact of foreign exchange translation.

Provision for (reversal of) credit losses

Provision for credit losses was down $242 million from the same quarter last year. The current quarter included a provision reversal on performing loans primarily due to a favourable change in our economic outlook, while the same quarter last year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was comparable with the same quarter last year.

Provision for credit losses was down $57 million from the prior quarter. Provision reversal on performing loans was up mainly due to a favourable change in our economic outlook. Provision for credit losses on impaired loans was down mainly due to lower provisions in the real estate sector.

Provision for credit losses for the six months ended April 30, 2021 was down $212 million from the same period in 2020. Provision for credit losses on performing loans was down, as the same period in 2020 was adversely impacted by the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was up mainly attributable to the real estate sector.

Non-interest expenses

Non-interest expenses were down $20 million or 7% from the same quarter last year, primarily due to the impact of foreign exchange translation. U.S. dollar expenses were marginally higher due to performance-based compensation, partially offset by lower business development costs.

Non-interest expenses were down $9 million or 3% from the prior quarter, primarily due to the impact of foreign exchange translation. U.S. dollar expenses were comparable as higher employee compensation in the prior quarter, driven by seasonality associated with certain benefits and performance-based awards, were offset by higher technology expenses and variable commissions in the current quarter.

Non-interest expenses for the six months ended April 30, 2021 were down $38 million or 6% from the same period in 2020, primarily due to the impact of foreign exchange translation. U.S. dollar expenses were comparable as lower business development costs were offset by higher employee compensation.

Income taxes

Income taxes were up $82 million from the same quarter last year and up $9 million from the prior quarter, primarily due to higher income.

Income taxes for the six months ended April 30, 2021 were up $107 million from the same period in 2020, primarily due to higher income.

Capital Markets

Capital Markets provides integrated global markets products and services, investment banking advisory and execution, corporate banking solutions and top-ranked research to our clients around the world. It includes Direct Financial Services which focuses on expanding CIBC’s digitally-enabled capabilities to provide a cohesive set of direct banking, direct investing and innovative multi-currency payment solutions for CIBC’s clients.

Results(1)

 

    

For the three

months ended

          

For the six

months ended

 
$ millions   

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30 (2)

          

2021

Apr. 30

   

2020

Apr. 30 (2)

 

Revenue

                 

Global markets

   $ 539     $ 614     $ 462        $     1,153     $ 962  

Corporate and investment banking

     448       358       329          806       659  

Direct financial services

     207       202       176          409       352  

Total revenue (3)

     1,194       1,174       967          2,368       1,973  

Provision for (reversal of) credit losses

                 

Impaired

     8       42       43          50       41  

Performing

     (19     (37     193          (56     189  

Total provision for (reversal of) credit losses

     (11     5       236          (6     230  

Non-interest expenses

     538       522       492          1,060       984  

Income before income taxes

     667       647       239          1,314       759  

Income taxes (3)

     172       154       62          326       204  

Net income

   $ 495     $ 493     $ 177        $ 988     $ 555  

Net income attributable to:

                 

Equity shareholders

   $ 495     $ 493     $ 177        $ 988     $ 555  

Efficiency ratio

     45.0  %      44.5  %      50.9  %         44.8  %      49.9  % 

Return on equity (4)

     29.0  %      28.0  %      10.2  %         28.5  %      16.2  % 

Average allocated common equity (4)

   $     7,003     $     6,991     $     7,062        $ 6,997     $     6,878  

Full-time equivalent employees (5)

     2,120       1,943       1,888          2,120       1,888  
(1)

For additional segmented information, see the notes to the interim consolidated financial statements.

(2)

Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3)

Revenue and income taxes are reported on a TEB. Accordingly, revenue and income taxes include a TEB adjustment of $51 million for the quarter ended April 30, 2021 (January 31, 2021: $54 million; April 30, 2020: $46 million) and $105 million for the six months ended April 30, 2021 (April 30, 2020: $95 million). The equivalent amounts are offset in the revenue and income taxes of Corporate and Other.

(4)

For additional information, see the “Non-GAAP measures” section.

(5)

In the second quarter of 2021, 79 full-time equivalent employees related to Simplii Financial’s call centre operations were transferred to Capital Markets from Corporate and Other, with no financial impact as the costs were previously allocated to direct financial services.

 

12   CIBC SECOND QUARTER 2021


Table of Contents

Financial overview

Net income for the quarter was $495 million, up $318 million from the same quarter last year, primarily due to higher revenue, and a provision reversal in the current quarter compared to a provision for credit losses in the prior year, partially offset by higher non-interest expenses.

Net income was comparable with the prior quarter.

Net income for the six months ended April 30, 2021 was $988 million, up $433 million from the same period in 2020, primarily due to higher revenue, and a provision reversal in the current period compared to a provision for credit losses in the prior period, partially offset by higher non-interest expenses.

Revenue

Revenue was up $227 million or 23% from the same quarter last year.

Global markets revenue was up $77 million, primarily due to higher equities and commodities trading revenue, partially offset by lower foreign exchange and fixed income trading revenue. The previous period also included the impact of unfavourable CVA and FVA.

Corporate and investment banking revenue was up $119 million, primarily due to higher equity underwriting activity, higher advisory revenue and higher corporate banking revenue.

Direct financial services revenue was up $31 million, primarily due to higher direct brokerage trading volumes and higher revenue from foreign exchange and global money transfers.

Revenue was up $20 million or 2% from the prior quarter.

Global markets revenue was down $75 million, primarily due to lower revenue from our fixed income and foreign exchange businesses.

Corporate and investment banking revenue was up $90 million, primarily due to higher debt and equity underwriting activity and advisory revenue.

Direct financial services revenue was up $5 million, primarily due to higher direct brokerage trading volumes.

Revenue for the six months ended April 30, 2021 was up $395 million or 20% from the same period in 2020.

Global markets revenue was up $191 million, primarily due to higher revenue from our equities and commodities trading businesses, partially offset by lower foreign exchange and fixed income trading revenue. The previous period also included the impact of unfavourable CVA and FVA.

Corporate and investment banking revenue was up $147 million, primarily due to higher equity and debt underwriting activity and higher advisory revenue.

Direct financial services revenue was up $57 million, primarily due to higher direct brokerage trading volumes.

Provision for (reversal of) credit losses

Provision for credit losses was down $247 million from the same quarter last year. The current quarter included a provision reversal on performing loans due to a favourable change in our economic outlook, while the same quarter last year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was down due to lower provisions in the oil and gas sectors.

Provision for credit losses was down $16 million from the prior quarter. Provision reversal on performing loans was down as the prior quarter had higher transfers of performing loans to impaired. Provision for credit losses on impaired loans was down due to lower provisions in the utilities sector.

Provision for credit losses for the six months ended April 30, 2021 was down $236 million from the same period in 2020. Provision for credit losses on performing loans was down, as the same period in 2020 was adversely impacted by the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was up due to higher provisions in the utilities sector, partially offset by lower provisions in the oil and gas sector.

Non-interest expenses

Non-interest expenses were up $46 million or 9% from the same quarter last year, primarily due to higher performance-based compensation and investments in strategic initiatives.

Non-interest expenses were up $16 million or 3% from the prior quarter, primarily due to higher employee-related compensation and investments in strategic initiatives, partially offset by lower performance-based compensation.

Non-interest expenses for the six months ended April 30, 2021 were up $76 million or 8% from the same period in 2020, primarily due to higher performance-based compensation and investments in strategic initiatives.

Income taxes

Income taxes were up $110 million from the same quarter last year and up $18 million from the prior quarter, primarily due to higher income.

Income taxes for the six months ended April 30, 2021 were up $122 million from the same period in 2020, primarily due to higher income.

Corporate and Other

Corporate and Other includes the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture and Brand, Finance and Enterprise Strategy, as well as other support groups. The expenses of these functional and support groups are generally allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic investments, as well as other income statement and balance sheet items not directly attributable to the business lines.

 

CIBC SECOND QUARTER 2021     13  


Table of Contents

Results(1)

 

    

For the three

months ended

          

For the six

months ended

 

$ millions

  

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30 (2)

          

2021

Apr. 30

   

2020

Apr. 30 (2)

 

Revenue

                 

International banking

   $ 168     $     174     $     170        $     342     $     376  

Other

     (38     (59     (31        (97     (23

Total revenue (3)

     130       115       139          245       353  

Provision for (reversal of) credit losses

                 

Impaired

     17       18       17          35       24  

Performing

     (9     (8     103          (17     102  

Total provision for credit losses

     8       10       120          18       126  

Non-interest expenses

     281       266       288          547       916  

Loss before income taxes

     (159     (161     (269        (320     (689

Income taxes (3)

     (97     (99     (100        (196     (278

Net income (loss)

   $ (62   $ (62   $ (169      $ (124   $ (411

Net income (loss) attributable to:

                 

Non-controlling interests

   $ 4     $ 4     $ (8      $ 8     $ (1

Equity shareholders

     (66     (66     (161        (132     (410

Full-time equivalent employees

           22,180             22,227             22,808                22,180             22,808  
(1)

For additional segmented information, see the notes to the interim consolidated financial statements.

(2)

Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3)

Revenue and income taxes of Capital Markets are reported on a TEB. The equivalent amounts are offset in the revenue and income taxes of Corporate and Other. Accordingly, revenue and income taxes include a TEB adjustment of $51 million for the quarter ended April 30, 2021 (January 31, 2021: $54 million; April 30, 2020: $46 million) and $105 million for the six months ended April 30, 2021 (April 30, 2020: $95 million).

Financial overview

Net loss for the quarter was $62 million, compared with a net loss of $169 million in the same quarter last year, as the current quarter included a lower provision for credit losses.

Net loss for the quarter was comparable with the prior quarter, as the current quarter included higher expenses, offset by higher revenue.

Net loss for the six months ended April 30, 2021 was $124 million, compared with a net loss of $411 million for the same period in 2020, as the prior period included a restructuring charge, shown as an item of note. The current period also included a lower provision for credit losses, offset by lower revenue.

Revenue

Revenue was down $9 million or 6% from the same quarter last year.

International banking revenue was comparable with the prior year, as higher U.S. dollar revenue in CIBC FirstCaribbean was largely offset by the impact of foreign exchange translation. The higher U.S. dollar revenue was the result of the higher ECL charges on debt securities in the prior period, partially offset by lower margins in the current quarter.

Other revenue was down $7 million, as the prior year included interest income related to the settlement of certain income tax matters and higher treasury revenue.

Revenue was up $15 million or 13% from the prior quarter.

International banking revenue was down $6 million primarily due to the impact of foreign exchange translation. U.S. dollar revenue in CIBC FirstCaribbean was comparable to the prior quarter.

Other revenue was up $21 million primarily due to higher treasury revenue and a lower TEB adjustment.

Revenue for the six months ended April 30, 2021 was down $108 million or 31% from the same period in 2020.

International banking revenue was down $34 million, primarily due to the impact of foreign exchange translation and lower U.S. dollar revenue in CIBC FirstCaribbean driven by narrower margins, partially offset by higher ECL charges on debt securities in the prior period.

Other revenue was down $74 million, primarily due to lower treasury revenue largely as a result of excess liquidity costs. The prior period included interest income related to the settlement of certain income tax matters as noted above.

Provision for (reversal of) credit losses

Provision for credit losses was down $112 million from the same quarter last year. The current quarter included a provision reversal on performing loans due to favourable credit migration, while the same quarter last year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was comparable with the same quarter last year.

Provision for credit losses was comparable with the prior quarter.

Provision for credit losses for the six months ended April 30, 2021 was down $108 million from the same period in 2020. Provision for credit losses on performing loans was down, as the same period in 2020 was adversely impacted by the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was up due to higher provisions in CIBC FirstCaribbean.

Non-interest expenses

Non-interest expenses were down $7 million or 2% from the same quarter last year, as the same quarter last year included a goodwill impairment charge, shown as an item of note, partially offset by higher unallocated corporate support costs in the current quarter.

Non-interest expenses were up $15 million or 6% from the prior quarter, primarily due to higher unallocated corporate support costs and higher expenses in CIBC FirstCaribbean, partially offset by the timing of spending on strategic initiatives.

Non-interest expenses for the six months ended April 30, 2021 were down $369 million or 40% from the same period in 2020, as the prior period included a restructuring charge and a goodwill impairment charge, both shown as items of note.

Income taxes

Income tax benefit was comparable to the same quarter last year even with a lower loss, as the ECL provisions in CIBC FirstCaribbean in the same quarter in the prior year resulted in limited tax benefits.

Income tax benefit was comparable to the prior quarter.

Income tax benefit for the six months ended April 30, 2021 was down $82 million from the same period in 2020, primarily due to a lower loss.

 

14   CIBC SECOND QUARTER 2021


Table of Contents

Financial condition

Review of condensed consolidated balance sheet

 

$ millions, as at   

2021

Apr. 30

    

2020

Oct. 31

 

Assets

     

Cash and deposits with banks

   $ 47,197      $ 62,518  

Securities

     155,122        149,046  

Securities borrowed and purchased under resale agreements

     74,679        74,142  

Loans and acceptances, net of allowance

     432,120        416,388  

Derivative instruments

     35,313        32,730  

Other assets

     38,447        34,727  
     $ 782,878      $ 769,551  

Liabilities and equity

     

Deposits

   $ 576,563      $ 570,740  

Obligations related to securities lent, sold short and under repurchase agreements

     89,594        89,440  

Derivative instruments

     34,121        30,508  

Other liabilities

     34,267        31,816  

Subordinated indebtedness

     5,653        5,712  

Equity

     42,680        41,335  
     $     782,878      $     769,551  

Assets

As at April 30, 2021, total assets were up $13.3 billion or 2% from October 31, 2020, net of a decrease of approximately $18 billion due to the depreciation of the U.S. dollar.

Cash and deposits with banks decreased by $15.3 billion or 25%, primarily due to lower short-term placements in Treasury.

Securities increased by $6.1 billion or 4%, primarily due to increases in corporate equity and corporate debt, partially offset by decreases in debt securities in Canadian governments and U.S. Treasury and other agencies.

Securities borrowed and purchased under resale agreements increased by $0.5 billion or 1%, primarily due to client-driven activities.

Loans and acceptances, net of allowance, increased by $15.7 billion or 4%, primarily due to increases in Canadian residential mortgages and business and government loans, partially offset by a decrease in U.S. business and government loans due to foreign exchange translation.

Derivative instruments increased by $2.6 billion or 8%, largely driven by increases in foreign exchange and equity derivatives valuation, partially offset by a decrease in interest rate derivatives valuation.

Other assets increased by $3.7 billion or 11%, primarily due to increases in collateral pledged for derivatives and precious metals.

Liabilities

As at April 30, 2021, total liabilities were up $12.0 billion or 2% from October 31, 2020, net of a decrease of approximately $18 billion due to the depreciation of the U.S. dollar.

Deposits increased by $5.8 billion or 1%, primarily due to domestic retail volume growth and increased wholesale funding. Further details on the composition of deposits are provided in Note 7 to our interim consolidated financial statements.

Obligations related to securities lent, sold short and under repurchase agreements were comparable to the prior period.

Derivative instruments increased by $3.6 billion or 12%, largely driven by increases in equity and foreign exchange derivatives valuation, partially offset by decreases in interest rate and other commodity derivatives valuation.

Other liabilities increased by $2.5 billion or 8%, primarily due to increases in acceptances and collateral received for derivatives.

Subordinated indebtedness decreased by $0.1 billion or 1%. In the prior quarter we redeemed subordinated indebtedness and in the current quarter we issued subordinated indebtedness. For further details see the “Capital management” section.

Equity

As at April 30, 2021, equity increased by $1.3 billion or 3% from October 31, 2020, primarily due to a net increase in retained earnings, partially offset by a decrease in accumulated other comprehensive income.

 

CIBC SECOND QUARTER 2021     15  


Table of Contents

Capital management

We actively manage our capital to maintain a strong and efficient capital base that provides balance sheet strength, enables our businesses to grow and execute on our strategy, and meets regulatory requirements. For additional details on capital management, see pages 31 to 42 of our 2020 Annual Report.

Regulatory capital requirements under Basel III

Our regulatory capital requirements are determined in accordance with guidelines issued by the Office of the Superintendent of Financial Institutions (OSFI), which are based upon the capital standards developed by the Basel Committee on Banking Supervision (BCBS).

Regulatory capital consists of CET1, Tier 1 and Tier 2 capital. The tiers of regulatory capital indicate increasing quality/permanence and the ability to absorb losses. The major components of our regulatory capital are summarized as follows:

 

 

LOGO

 

(1)

Excluding AOCI relating to cash flow hedges and changes to fair value option (FVO) liabilities attributable to changes in own credit risk.

(2)

In response to the COVID-19 pandemic, OSFI has provided regulatory flexibility by implementing transitional arrangements for the treatment of expected loss provisioning, such that part of the allowances that would otherwise be included in Tier 2 capital will instead qualify for inclusion in CET1 capital subject to certain scalars and limitations until fiscal 2022. See the “Continuous enhancement to regulatory capital requirements” section for additional details.

Qualifying regulatory capital instruments must be capable of absorbing loss at the point of non-viability of the financial institution. Non-qualifying Tier 1 and Tier 2 capital instruments are excluded from regulatory capital at a rate of 10% per annum until November 1, 2021, at which point they will have no regulatory value.

OSFI requires all institutions to achieve target capital ratios which include buffers. Targets may be higher for certain institutions at OSFI’s discretion. CIBC, along with Bank of Montreal, Bank of Nova Scotia, National Bank of Canada, Royal Bank of Canada, and the Toronto-Dominion Bank, have been designated by OSFI as domestic systemically important banks (D-SIBs) in Canada. D-SIBs are subject to a CET1 surcharge equal to 1.0% of RWA and a Domestic Stability Buffer (DSB) requirement intended to address Pillar 2 risks that are not adequately captured in the Pillar 1 capital requirements. The DSB is currently set at 1.0% but can range from 0% to 2.5% of RWA, see the “Continuous enhancement to regulatory capital requirements” section for further details. Additionally, banks need to hold an incremental countercyclical capital buffer equal to their weighted-average buffer requirement in Canada and across certain other jurisdictions where they have private sector credit exposures. OSFI’s current targets are summarized below:

 

As at April 30, 2021   Minimum     Capital
conservation
buffer
    D-SIB
buffer
    Pillar 1
targets 
(1)
    Domestic
Stability
Buffer
    Target
including
all buffer
requirements
 

CET1 ratio

    4.5      2.5      1.0      8.0      1.0      9.0 

Tier 1 capital ratio

    6.0      2.5      1.0      9.5      1.0      10.5 

Total capital ratio

    8.0      2.5      1.0      11.5      1.0      12.5 
(1)

The countercyclical capital buffer applicable to CIBC is insignificant as at April 30, 2021.

Capital adequacy requirements are applied on a consolidated basis consistent with our financial statements, except for our insurance subsidiaries (CIBC Cayman Reinsurance Limited and CIBC Life Insurance Company Limited), which are excluded from the regulatory scope of consolidation. The basis of consolidation applied to our financial statements is described in Note 1 to the consolidated financial statements included in our 2020 Annual Report. CIBC Life Insurance Company Limited is subject to OSFI’s Life Insurance Capital Adequacy Test.

 

16   CIBC SECOND QUARTER 2021


Table of Contents

Continuous enhancement to regulatory capital requirements

The BCBS and OSFI have published a number of proposals for changes to the existing regulatory capital requirements to strengthen the regulation, supervision, and practices of banks with the overall objective of enhancing financial stability (see pages 34 to 35 of our 2020 Annual Report). The discussion below provides a summary of BCBS and OSFI publications that have been issued since our 2020 Annual Report.

On March 15, 2021, OSFI published an update to its July 18, 2020 capital ruling on Limited Recourse Capital Notes (LRCNs). The July 18, 2020 capital ruling assessed LRCNs relative to the eligibility criteria set out in the Capital Adequacy Requirements (CAR) guideline, and provided that the LRCNs can qualify as Additional Tier 1 regulatory capital, subject to certain limitations and disclosure requirements. The 2021 revisions provide clarification on the ruling’s conditions and limitations on the permitted investor base, and the cap on the amount of LRCN issuances that may be included in regulatory capital.

On March 16, 2021, OSFI announced that the temporary COVID-19-related reduction of stressed value-at-risk multipliers used in the determination of market risk capital should be unwound effective May 1, 2021.

Transitional arrangements for the capital treatment of expected loss provisioning

In response to the COVID-19 pandemic, OSFI introduced transitional arrangements for ECL provisioning that are available under the Basel Framework. These transitional arrangements were effective immediately upon being announced by OSFI on March 27, 2020 and result in a portion of allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount of ECL allowances eligible for inclusion in CET1 capital is determined based on the increase in stage 1 and stage 2 allowances relative to balances as at January 31, 2020 as a baseline. This amount is then adjusted for tax effects and is subject to a scaling factor that will decrease over time. The scaling factor has been set at 70% for fiscal 2020, 50% for fiscal 2021, and 25% for fiscal 2022. For exposures under the internal ratings-based (IRB) approach, the lower of this amount and excess allowances otherwise eligible for inclusion in Tier 2 capital is included as CET1 capital under the transitional arrangements.

Basel III reforms

In March 2021, OSFI launched a public consultation on the implementation of the final Basel III reforms into its capital, leverage and related disclosure guidelines. OSFI’s proposals are in line with the BCBS standards, with considerations given to the Canadian market. OSFI’s proposed changes include:

 

revisions to both the Internal Rating-based Approach (IRB) and Standardized Approach to credit risk;

 

revised operational, market risk, and CVA frameworks;

 

updated CET1 capital deductions for certain assets;

 

an updated capital output floor based on the revised Standardized Approach noted above, with the phase-in of the floor factor over 3 years beginning in 2023; and

 

modification to the Leverage Ratio framework, including a buffer requirement for D-SIBs.

The proposed implementation date for the changes is the first quarter of 2023, with the exceptions of revisions to the CVA and market risk frameworks, which are targeted for the first quarter of 2024.

Domestic Stability Buffer

In response to the COVID-19 pandemic and market conditions, OSFI announced an immediate reduction in the DSB requirement from 2.0% to 1.0% for all D-SIBs effective March 13, 2020. This reduction decreased OSFI’s target capital ratios, including all buffers, for CET1, Tier 1 and Total capital to 9.0%, 10.5% and 12.5%, respectively. On December 8, 2020, OSFI again announced that the DSB would remain unchanged at 1.0%.

Capital treatment of federal program supporting highly affected sectors

In January 2021, OSFI provided direction on the capital treatment of the government-guaranteed loans made under the Business Development Bank of Canada (BDC) Highly Affected Sectors Credit Availability Program (HASCAP) loan guarantee program. The loans will be considered sovereign risk based on the BDC guarantee, and the relevant risk weight under the CAR Guideline will be applied accordingly. The entire amount of the loan is to be included in the exposure measure used for calculating the leverage ratio. See “Government lending programs in response to COVID-19” for further details.

Total loss absorbing capacity requirements

Beginning in the first quarter of 2022, D-SIBs will be required to maintain a supervisory target total loss absorbing capacity requirements (TLAC) ratio (which comprises a minimum risk-based TLAC ratio of 21.5% plus the then-applicable DSB) and a minimum TLAC leverage ratio of 6.75%. TLAC is required to ensure that a non-viable bank will have sufficient loss absorbing capacity, through its regulatory capital and bail-in eligible instruments, to support its recapitalization. In accordance with the Department of Finance’s Bank recapitalization (Bail-in) conversion regulations, senior debt issued by D-SIBs on or after September 23, 2018, with an original term to maturity of more than 400 days (including explicit or embedded options) that is unsecured or partially secured is subject to bail-in. Consumer deposits, certain derivatives, covered bonds, and certain structured notes are not eligible for bail-in.

We continue to monitor and prepare for developments impacting regulatory capital requirements and disclosures.

 

CIBC SECOND QUARTER 2021     17  


Table of Contents

Regulatory capital

Our regulatory capital levels and ratios are summarized below:

$ millions, as at   

2021

Apr. 30

   

2020

Oct. 31

 

CET1 capital (1)

     $    31,915     $     30,876  

Tier 1 capital

     35,759       34,775  

Total capital

     41,826       40,969  

RWA consist of:

    

Credit risk

     219,292       218,694  

Market risk

     7,937       5,858  

Operational risk

     30,768       30,319  

Total RWA

     257,997       254,871  

CET1 ratio

     12.4  %      12.1  % 

Tier 1 capital ratio

     13.9  %      13.6  % 

Total capital ratio

     16.2  %      16.1  % 
(1)

Includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020. The transitional arrangement results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount is subject to certain adjustments and limitations until fiscal 2022.

CET1 ratio

The CET1 ratio at April 30, 2021 increased 0.3% from October 31, 2020, driven by the increase in CET1 capital, partially offset by the impact of an increase in RWA.

The increase in CET1 capital was primarily the result of internal capital generation (net income less dividends), partially offset by a decrease in AOCI (largely due to the impact of currency translation adjustments). The increase in RWA was primarily due to increases in book size, market risk levels and model updates, partially offset by the impact of foreign exchange translation, improved credit quality and methodology changes. Overall the impact of foreign exchange translation on the CET1 ratio was minimal.

The combined impact of our expected loss calculation for regulatory capital purposes and credit risk RWA could act as a headwind to the positive impact of earnings on our CET1 ratio in future periods to the extent balances increase, utilization and delinquency rates increase and risk ratings and other credit scores deteriorate in line with our forward-looking information.

Tier 1 capital ratio

The Tier 1 capital ratio at April 30, 2021 increased 0.3% from October 31, 2020 primarily due to the factors affecting the CET1 ratio noted above.

Total capital ratio

The Total capital ratio at April 30, 2021 increased 0.1% from October 31, 2020. Total capital was favourably impacted by the factors affecting the Tier 1 capital ratio noted above, while being negatively impacted by a decrease in the applicable cap related to the inclusion of non-qualifying instruments. The negative impact of a redemption of subordinated indebtedness during the first quarter was offset by the issuance of subordinated indebtedness during the second quarter (see “Significant capital management activity” for additional details).

Leverage ratio

The Basel III capital standards include a non-risk-based capital metric, the leverage ratio, to supplement risk-based capital requirements. The leverage ratio is defined as Tier 1 capital divided by the leverage ratio exposure. The leverage ratio exposure is defined under the rules as the sum of:

(i)

On-balance sheet assets less Tier 1 capital regulatory adjustments;

(ii)

Derivative exposures;

(iii)

Securities financing transaction exposures; and

(iv)

Off-balance sheet exposures (such as commitments, direct credit substitutes, letters of credit, and securitization exposures).

OSFI expects federally regulated deposit-taking institutions to have leverage ratios that meet or exceed 3.0%. This minimum may be higher for certain institutions at OSFI’s discretion.

 

$ millions, as at   

2021

Apr. 30

   

2020

Oct. 31

 

Tier 1 capital

   $       35,759     $       34,775  

Leverage ratio exposure (1)

     767,391       741,760  

Leverage ratio

     4.7  %      4.7  % 
(1)

Includes the impact of regulatory flexibility provided by OSFI in respect of exposures arising from central bank reserves and sovereign-issued securities that qualify as high quality liquid assets. The treatment specified by OSFI permits these items to be excluded from the leverage ratio exposure measure.

The leverage ratio at April 30, 2021 was comparable with October 31, 2020, as the impact of an increase in Tier 1 capital was offset by the impact of an increase in leverage ratio exposure. The increase in leverage ratio exposure was primarily driven by an increase in on-balance sheet exposures.

 

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Significant capital management activity

In conjunction with OSFI’s March 13, 2020 announcement to decrease the DSB to 1.0% in response to COVID-19, OSFI also announced that it expects all federally regulated financial institutions to cease dividend increases and share buybacks for the time being, in order to ensure that the additional capital available is used to support Canadian lending activities. The following were the main capital initiatives undertaken in 2021:

Shareholder investment plan

Pursuant to the shareholder investment plan, we issued 259,931 common shares for consideration of $33 million for the current quarter and 554,095 common shares for consideration of $65 million for the six months ended April 30, 2021.

Subordinated indebtedness

On January 26, 2021, we redeemed all $1.0 billion of our 3.42% Debentures due January 26, 2026. In accordance with their terms, the Debentures

were redeemed at 100% of their principal amount, plus accrued and unpaid interest thereon.

On April 19, 2021, we issued $1.0 billion principal amount of 1.96% Debentures due April 21, 2031 (subordinated indebtedness). The Debentures bear interest at a fixed rate of 1.96% per annum (paid semi-annually) until April 21, 2026, and at three-month CDOR plus 0.56% per annum (paid quarterly) thereafter until maturity on April 21, 2031.

Outstanding share data

The table below provides a summary of our outstanding shares, Non-Viability Contingent Capital (NVCC) instruments, and the maximum number of common shares issuable on conversion/exercise:

 

     Shares outstanding     

Minimum
conversion

price per
common share

    

Maximum number
of common

shares issuable
on conversion

 
$ millions, except number of shares and per share amounts, as at April 30, 2021    Number
of shares
    

Par

value

 

Preferred shares (1)(2)

           

Series 39 (NVCC)

     16,000,000      $ 400      $     5.00        80,000,000  

Series 41 (NVCC)

     12,000,000        300        5.00        60,000,000  

Series 43 (NVCC)

     12,000,000        300        5.00        60,000,000  

Series 45 (NVCC)

     32,000,000        800        5.00        160,000,000  

Series 47 (NVCC)

     18,000,000        450        5.00        90,000,000  

Series 49 (NVCC)

     13,000,000        325        5.00        65,000,000  

Series 51 (NVCC)

     10,000,000        250        5.00        50,000,000  

Limited recourse capital notes (2)(3)

           

4.375% Limited recourse capital notes Series 1 (NVCC)

     n/a        750        5.00        150,000,000  

Subordinated indebtedness (2)(4)

           

3.45% Debentures due April 4, 2028 (NVCC)

     n/a        1,500        5.00        450,000,000  

2.95% Debentures due June 19, 2029 (NVCC)

     n/a        1,500        5.00        450,000,000  

2.01% Debentures due July 21, 2030 (NVCC)

     n/a        1,000        5.00        300,000,000  

1.96% Debentures due April 21, 2031 (NVCC)

     n/a        1,000        5.00        300,000,000  

Total

            $     8,575                 2,215,000,000  
(1)

Upon the occurrence of a Trigger Event, each share is convertible into a number of common shares, determined by dividing the par value of $25.00 plus declared and unpaid dividends by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per share (subject to adjustment in certain events as defined in the relevant prospectus supplement). Preferred shareholders do not have the right to convert their shares into common shares.

(2)

The maximum number of common shares issuable on conversion excludes the impact of declared but unpaid dividends and accrued interest.

(3)

Upon the occurrence of a Trigger Event, the Series 53 Preferred Shares held in the Limited Recourse Trust in support of the limited recourse capital notes are convertible into a number of common shares, determined by dividing the par value of $1,000 by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per common share (subject to adjustment in certain events as defined in the relevant prospectus supplement).

(4)

Upon the occurrence of a Trigger Event, the Debentures are convertible into a number of common shares, determined by dividing 150% of the par value plus accrued and unpaid interest by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per common share (subject to adjustment in certain events as defined in the relevant prospectus supplement).

n/a

Not applicable.

The occurrence of a “Trigger Event” would result in conversion of all of the outstanding NVCC instruments described above, which would represent a dilution impact of 83% based on the number of CIBC common shares outstanding as at April 30, 2021. As described in the CAR Guideline, a Trigger Event occurs when OSFI determines the bank is or is about to become non-viable and, if after conversion of all contingent instruments and consideration of any other relevant factors or circumstances, it is reasonably likely that its viability will be restored or maintained; or if the bank has accepted or agreed to accept a capital injection or equivalent support from a federal or provincial government, without which OSFI would have determined the bank to be non-viable.

In addition to the potential dilution impacts related to the NVCC instruments discussed above, as at April 30, 2021, $23.9 billion (October 31, 2020: $19.9 billion) of our outstanding liabilities were subject to conversion under the bail-in regime. Under the bail-in regime there is no fixed and pre-determined contractual conversion ratio for the conversion of the specified eligible shares and liabilities of CIBC that are subject to a bail-in conversion into common shares, nor are there specific requirements regarding whether liabilities subject to a bail-in conversion are converted into common shares of CIBC or any of its affiliates. Canada Deposit Insurance Corporation (CDIC) determines the timing of the bail-in conversion, the portion of the specified eligible shares and liabilities to be converted and the terms and conditions of the conversion, subject to parameters set out in the bail-in regime. See the “Total loss absorbing capacity requirements” section for further details.

Off-balance sheet arrangements

We enter into off-balance sheet arrangements in the normal course of our business. Details of our off-balance sheet arrangements are provided on page 41 of our 2020 Annual Report and also in Note 7 and Note 22 to the consolidated financial statements included in our 2020 Annual Report.

 

 

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Management of risk

Our approach to management of risk has not changed significantly from that described on pages 43 to 82 of our 2020 Annual Report.

Risk overview

CIBC faces a wide variety of risks across all of its areas of business. Identifying and understanding risks and their impact allows CIBC to frame its risk appetite and risk management practices. Defining acceptable levels of risk, and establishing sound principles, policies and practices for managing risks, is fundamental to achieving consistent and sustainable long-term performance, while remaining within our risk appetite.

 

Our risk appetite defines tolerance levels for various risks. This is the foundation for our risk management culture and our risk management framework.

Our risk management framework includes:

 

CIBC, SBU and functional group-level risk appetite statements;

 

Risk frameworks, policies, procedures and limits to align activities with our risk appetite;

 

Regular risk reports to identify and communicate risk levels;

 

An independent control framework to identify and test the design and operating effectiveness of our key controls;

 

Stress testing to consider the potential impact of changes in the business environment on capital, liquidity and earnings;

 

Proactive consideration of risk mitigation options in order to optimize results; and

 

Oversight through our risk-focused committees and governance structure.

Managing risk is a shared responsibility at CIBC. Business units and risk management professionals work in collaboration to ensure that business strategies and activities are consistent with our risk appetite. CIBC’s approach to enterprise-wide risk management aligns with the three lines of defence model:

(i)

As the first line of defence, CIBC’s SBUs and functional groups own the risks and are accountable and responsible for identifying and assessing risks inherent in their activities in accordance with the CIBC risk appetite. In addition, they establish and maintain controls to mitigate such risks. The first line of defence may include governance groups within the relevant area to facilitate the control framework and other risk-related processes. Control groups provide subject matter expertise to the business lines and/or implement and maintain enterprise-wide control programs and activities. While control groups collaborate with the lines of business in identifying and managing risk, they also challenge risk decisions and risk mitigation strategies.

(ii)

The second line of defence is independent from the first line of defence and provides an enterprise-wide view of specific risk types, guidance and effective challenge to risk and control activities. Risk Management is the primary second line of defence. Risk Management may leverage or rely on subject matter expertise of other groups (e.g., third parties or control groups) to better inform their independent assessments, as appropriate.

(iii)

As the third line of defence, CIBC’s internal audit function provides reasonable assurance to senior management and the Audit Committee of the Board of Directors (the Board) on the effectiveness of CIBC’s governance practices, risk management processes, and internal controls as a part of its risk-based audit plan and in accordance with its mandate as described in the Internal Audit Charter.

A strong risk culture and communication between the three lines of defence are important characteristics of effective risk management.

We continuously monitor our risk profile against our defined risk appetite and related limits, taking action as needed to maintain an appropriate balance of risk and return. Monitoring our risk profile includes forward-looking analysis of sensitivity to local and global market factors, economic conditions, and geo-political and regulatory environments that influence our overall risk profile.

Regular and transparent risk reporting and discussion at senior management committees facilitates communication of risks and discussion of risk management strategies across the organization.

Top and emerging risks

We monitor and review top and emerging risks that may affect our future results and take action to mitigate potential risks. We perform in-depth analyses, which can include stress testing our exposures relative to the risks, and provide updates and related developments to the Board on a regular basis. Top and emerging risks are those that we consider to have potential negative implications that are material for CIBC. See pages 50 to 53 of our 2020 Annual Report for details regarding the following top and emerging risks:

 

 

Disintermediation risk

 

Anti-money laundering

 

U.S. banking regulation

 

Technology, information and cyber security risk

 

Third party risk

 

Climate risk

 

Corporate transactions

The remainder of this section describes top and emerging risks that have been updated for developments that have occurred since the issuance of our 2020 Annual Report, as well as regulatory and accounting developments that are material for CIBC.

 

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Pandemic outbreaks

The COVID-19 pandemic and the restrictions imposed by governments around the world to limit its impact have disrupted the global economy, financial markets, supply chains and business productivity in unprecedented and unpredictable ways, and have limited economic activity in Canada, the U.S. and other regions where we operate. While measures to slow the spread of infection, including lockdowns, have negatively impacted economic activity and our short-term expectations, our medium-term outlook is supported by the assumption that the rollout of mass vaccination programs over the spring and summer will be able to effectively control the spread of the virus, including the emerging variants.

We are closely monitoring the evolving impacts of the pandemic. COVID-19 has adversely affected our business and uncertainty remains as to the full impact of COVID-19 on the global economy, financial markets, and our business, results of operations, reputation and financial condition, including our regulatory capital, liquidity positions and our ability to meet regulatory and other requirements. The ultimate impacts will depend on future developments that are highly uncertain, such as the scope, severity and duration of the pandemic, including the ongoing fallout from the current wave, subsequent resurgences of infection including from new variants, actions taken by governments, monetary authorities, regulators, financial institutions and other third parties in response to subsequent waves, the extent of physical distancing measures, as well as business closures and travel restrictions mandated by governments. The rollout of vaccines has created positive momentum through the beginning of 2021, although this is likely to be tempered by growth in the number of cases, especially those seen in other countries, the efficacy of vaccines against emerging variants, and further government restrictions, such as deeper lockdowns and travel and border restrictions.

A substantial amount of our business involves extending credit or otherwise providing financial resources to individuals, companies, industries or governments that have likely been adversely impacted by the pandemic, hindering their ability to meet original loan terms and potentially impacting their ability to repay their loans. While our estimate of ECL on performing loans considers the likelihood and extent of future defaults and impairments, given the inherent uncertainty caused by COVID-19, actual experience may differ materially from our current estimates. To the extent that business activity does not increase in line with our expectations due to the impact of the current and subsequent waves, or if unemployment does not decline in line with our expectations and clients default on loans beyond our current expectations, we may recognize further credit losses beyond those reflected in the current quarter’s ECLs. The effectiveness of various government support programs in place for individuals and businesses as well as the timing of completion of the vaccination programs impacts our expectations. Similarly, because of changing economic and market conditions, we may be required to recognize losses, impairments, or reductions in other comprehensive income (OCI) in future periods relating to other assets that we hold.

Net interest income is significantly impacted by market interest rates. Interest rate cuts by the Bank of Canada and the U.S. Federal Reserve in response to COVID-19 have negatively impacted our net interest income. The overall effect of lower, or potentially negative, interest rates cannot be predicted and depends on future actions that the Bank of Canada and the U.S. Federal Reserve may take to increase or reduce targeted rates in response to COVID-19 or other factors.

We have taken multiple steps to support our clients through these challenging times (see the “CIBC client relief programs in response to COVID-19” section for further details). Governments, monetary authorities, regulators and financial institutions have also taken actions to support the economy, increase liquidity, mitigate unemployment, provide temporary financial assistance and regulatory flexibility, and implement other measures intended to mitigate or counterbalance the adverse economic consequences of the pandemic. We continue to work with regulators and governments across the jurisdictions in which we operate to support and facilitate government programs assisting our clients. The unprecedented nature, scope and speed of these actions, while essential to mitigate the economic damage of the crisis, present additional risks for CIBC.

The possibility of widespread illness amongst our clients and team members poses additional business and operational risk. We continue to adapt our operating model to the resurgence of COVID-19 cases, with a focus on the continued safety of our team members, especially those working on-site. Remote work arrangements continue to be in place where possible, with our return to office strategy evolving in line with government and public health authorities’ guidelines.

Overall, our organization has adapted well. Relevant operational risk metrics continue to track at an acceptable level, while uncertainty remains around the operational impact of the prolonged pandemic. Operational resilience and sustainability remain key areas of focus. We will continue to monitor our risk posture and trends to ensure operational risks are managed appropriately and in a timely manner.

If the COVID-19 pandemic is prolonged beyond our expectations, or further variants continue to emerge that give rise to similar effects that vaccines are not able to effectively mitigate in a timely manner, the adverse impact on the economy could deepen and result in further volatility and declines in financial markets. Moreover, it remains uncertain how the macroeconomic environment, societal and business norms will be impacted following this pandemic. Unexpected developments in financial markets, regulatory environments, or consumer behaviour and confidence may have adverse impacts on our business, results of operations, reputation and financial condition, for a substantial period of time.

Commodity prices

Within the past year, we have observed high volatility and historic lows in the price of crude oil driven by excess supply owing to a price war and constrained global activity impacting demand as the COVID-19 pandemic took hold. In recent months, we have seen a strong recovery in the price of oil, with West Texas Intermediate now trading above $60 per barrel, reflecting expectations of a return to economic growth as vaccination programs are well underway, along with a commitment from producers to restrict output. However, future price volatility remains a concern as considerable uncertainty remains associated with the pandemic recovery and the ongoing cooperation of the Organization of the Petroleum Exporting Countries (OPEC), and other major producers such as Saudi Arabia and Russia. In addition, we observed disruptions caused by a ransomware attack on the largest U.S. fuel pipeline, Colonial, causing operations to temporarily shut down as well as Michigan’s order to shut down Enbridge’s Line 5 pipeline; however, no material impacts to prices have been observed to date. Across the globe, and most notably in the U.S. under the Biden administration, we have seen a renewed focus of late on green energy policies with significant levels of infrastructure spending proposed to curb carbon emissions along with a recommitment to the goals of the Paris Agreement. These efforts, if sustained, are likely to have long-term impacts on the oil industry. Clients in our oil and gas portfolio continue to be assessed on the basis of our enhanced risk metrics that reflect the current environment. Other commodities including iron ore, lumber, copper and other base metals all reached multi-year highs recently amidst increased demand from Europe and China, vast fiscal stimulus announcements in the U.S., and increased green investments across the world economy. We continue to closely monitor our overall commodity exposure in a prudent manner.

 

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Geo-political risk

The level of geo-political risk escalates at certain points in time. While the specific impact on the global economy and on global credit and capital markets would depend on the nature of the event, in general, any major event could result in instability and volatility, leading to widening spreads, declining equity valuations, flight to safe-haven currencies and increased purchases of gold. In the short run, market disruption could hurt the net income of our trading and non-trading market risk positions. Geo-political risk could reduce economic growth, and in combination with the potential impacts on commodity prices and the recent rise of protectionism, could have serious negative implications for general economic and banking activities. Current areas of concern include:

 

Global uncertainty and market repercussions pertaining to the spread of COVID-19, including concerns related to the current and subsequent waves of infection as well as the growing case counts in other countries, the spread of the variants of concern, and the vaccine rollout programs;

 

Ongoing U.S. and China relations and trade issues;

 

Diplomatic tensions and the trade dispute between Canada and China;

 

Implications of the U.S. “Buy American” policy;

 

Relations between the U.S. and Iran;

 

Escalating tensions in the Middle East;

 

Civil unrest associated with the anti-government protests in Hong Kong; and

 

Concerns following the agreed-upon Brexit deal.

While it is impossible to predict where new geo-political disruption will occur, we do pay particular attention to markets and regions with existing or recent historical instability to assess the impact of these environments on the markets and businesses in which we operate.

Canadian consumer debt and the housing market

Regulatory measures that include revised mortgage underwriting guidelines (B-20 guidelines) and taxes on foreign ownership, combined with a previous low unemployment environment, had their intended effect as debt-to-income ratios flattened in 2018–2019. To counter the economic impact due to COVID-19, the government put in place several support programs, the Bank of Canada cut interest rates and CIBC assisted clients by offering temporary relief across all retail products. The housing market continues to appreciate in the midst of continued economic and employment uncertainty. Currently, we qualify variable rate mortgage borrowers using the Bank of Canada five-year fixed benchmark rate, which is typically higher than the variable rate by approximately two percentage points and is required as part of the B-20 guidelines. Effective June 1, 2021, OSFI and the Department of Finance announced that the minimum qualifying rate for uninsured and insured mortgages will be the higher of the mortgage contract rate plus 2%, or 5.25%, effectively replacing the Bank of Canada’s five-year fixed benchmark as the minimum floor. We run our enterprise-wide statistical stress tests at lower home prices to determine potential direct losses and have also conducted stress tests to assess the impact of rising unemployment rates on borrowers’ ability to repay loan obligations.

Interbank Offered Rate (IBOR) transition

Interest rate benchmarks including the London Interbank Offered Rate (LIBOR) and other similar benchmarks, are being reformed and replaced by new risk-free rates that are largely based on traded markets. The U.K.’s Financial Conduct Authority (FCA) originally announced in July 2017 that it would not compel banks to submit LIBOR rates after December 2021. In March 2021, the FCA and the ICE Benchmark Administrator (IBA) announced the dates for the cessation or loss of representativeness of various LIBOR rates including that certain non-USD LIBORs will cease on December 31, 2021 and that most USD LIBOR tenors will cease on June 30, 2023. As IBORs are widely referenced by large volumes of derivative, loan and cash products, the transition presents a number of risks to CIBC, and the industry as a whole. These transition risks include market risk (in the eventuality that new basis risks emerge), model risk, operational risk (as processes are changed or newly introduced), legal risk (as contracts are revised) and conduct risk (in ensuring clients are adequately informed/prepared). CIBC has established a comprehensive enterprise-wide program to manage and coordinate all aspects of the transition, including the identification and mitigation of these risks. See the “Other regulatory developments” section for further details.

Regulatory developments

See the “Capital management”, “Credit risk”, “Liquidity risk” and “Accounting and control matters” sections for additional information on regulatory developments.

Accounting developments

See the “Accounting and control matters” section and Note 1 to our interim consolidated financial statements for additional information on accounting developments.

 

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Risks arising from business activities

The chart below shows our business activities and related risk measures based upon regulatory RWA and allocated common equity as at April 30, 2021:

 

LOGO

 

(1)

Includes counterparty credit risk of $118 million, which comprises derivatives and repo-style transactions.

(2)

Includes counterparty credit risk of $16,381 million, which comprises derivatives and repo-style transactions.

(3)

Includes counterparty credit risk of $126 million, which comprises derivatives and repo-style transactions.

(4)

Represents allocated common equity relating to capital deductions, such as goodwill and intangible assets, in accordance with the rules in OSFI’s CAR Guideline.

 

CIBC SECOND QUARTER 2021     23  


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Credit risk

 

Credit risk is the risk of financial loss due to a borrower or counterparty failing to meet its obligations in accordance with contractual terms.

Credit risk arises out of the lending businesses in each of our SBUs. Other sources of credit risk consist of our trading activities, which include our over-the-counter (OTC) derivatives, debt securities, and our repo-style transaction activity. In addition to losses on the default of a borrower or counterparty, unrealized gains or losses may occur due to changes in the credit spread of the counterparty, which could impact the carrying or fair value of our assets.

Exposure to credit risk

$ millions, as at   

2021

Apr. 30

    

2020

Oct. 31

 

Business and government portfolios – advanced internal ratings-based approach (AIRB)

     

Drawn

   $ 231,091      $ 248,265  

Undrawn commitments

     64,009        59,379  

Repo-style transactions

     221,772        202,809  

Other off-balance sheet

     78,971        75,399  

OTC derivatives

     17,521        18,850  

Gross exposure at default (EAD) on business and government portfolios

     613,364        604,702  

Less: Collateral held for repo-style transactions

     204,935        187,832  

Net EAD on business and government portfolios

     408,429        416,870  

Retail portfolios – AIRB approach

     

Drawn

     279,121        265,097  

Undrawn commitments

     92,093        87,294  

Other off-balance sheet

     335        306  

Gross EAD on retail portfolios

     371,549        352,697  

Standardized portfolios (1)

     79,639        79,350  

Securitization exposures – AIRB approach

     10,396        12,276  

Gross EAD

   $     1,074,948      $     1,049,025  

Net EAD

   $ 870,013      $ 861,193  
(1)

Includes $69.0 billion relating to business and government loans (October 31, 2020: $69.7 billion), $5.9 billion (October 31, 2020: $6.2 billion) relating to retail portfolios, and $4.8 billion (October 31, 2020: $3.5 billion) relating to securitization exposures. Our business and government loans under the standardized approach consist of $43.3 billion (October 31, 2020: $45.7 billion) to corporates, $24.1 billion (October 31, 2020: $22.7 billion) to sovereigns, and $1.6 billion (October 31, 2020: $1.3 billion) to banks.

Forbearance policy

We employ forbearance techniques to manage client relationships and to minimize credit losses due to default, foreclosure or repossession. In certain circumstances, it may be necessary to modify a loan for reasons related to a borrower’s financial difficulties, reducing the potential for default. Total debt restructurings are subject to our normal quarterly impairment review which considers, amongst other factors, covenants and/or payment delinquencies. Loan loss provisions are adjusted as appropriate.

In retail lending, forbearance techniques include interest capitalization, amortization amendments and debt consolidations. We have a set of eligibility criteria which allow our Client Account Management team to determine suitable remediation strategies and propose products based on each borrower’s situation.

The solutions available to corporate and commercial clients vary based on the individual nature of the client’s situation and are undertaken selectively where it has been determined that the client has or is likely to have repayment difficulties servicing its obligations. Covenants often reveal changes in the client’s financial situation before there is a change in payment behaviour and typically allow for a right to reprice or accelerate payments. Solutions may be temporary in nature or may involve other special management options.

CIBC client relief programs in response to COVID-19

We have been actively engaged in lending activities to support our clients who are experiencing financial hardship caused by the COVID-19 pandemic. Further details about the client relief programs offered are described on page 62 of our 2020 Annual Report and in Note 6 to the consolidated financial statements in our 2020 Annual Report. The number of clients under these payment deferral programs has continued to decline considerably relative to the second and third quarters of 2020. Following the expiry of their payment deferral terms, the majority of these clients have returned to making regular payments on their loans with a relatively small segment of client accounts written off. As at April 30, 2021, the gross outstanding balance of loans for which CIBC provided payment deferrals was not significant for retail loans and products in Canada and the Caribbean (October 31, 2020: $3.3 billion) and $0.5 billion for business and government loans (October 31, 2020: $2.5 billion), including $0.1 billion in Canada and the U.S. (October 31, 2020: $1.0 billion) and $0.4 billion in the Caribbean (October 31, 2020: $1.5 billion). In addition to the loans that are under payment deferral programs in the Caribbean, an additional $0.6 billion of loans are expected to be restructured in the near term.

Government lending programs in response to COVID-19

During 2020, CIBC was engaged in a number of Government of Canada lending programs, including the Canada Emergency Business Account (CEBA) program and the Business Credit Availability Program (BCAP), that were introduced to improve access to credit and financing for Canadian businesses facing operational cash flow and liquidity challenges during the period of significant uncertainty caused by the COVID-19 pandemic. In addition, the U.S. federal government introduced government-backed loans and other funding programs for small and medium-sized businesses, including the U.S. Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Further details about the programs are described on page 62 of our 2020 Annual Report and in Note 2 to the consolidated financial statements in our 2020 Annual Report.

On January 26, 2021, the Government of Canada launched the HASCAP, which is a new loan program that is 100% guaranteed by the BDC and is available to small and medium-sized businesses that have been hardest hit by the pandemic. Application by eligible businesses commenced on February 1, 2021. Loans provided by CIBC under the HASCAP will be recognized on our consolidated balance sheet when funded.

As at April 30, 2021, loans of $4.4 billion (October 31, 2020: $2.9 billion) have been provided to our clients under the CEBA, which are accounted for off-balance sheet. In addition, funded loans outstanding on our interim consolidated balance sheet under the BCAP and HASCAP programs were $0.2 billion (October 31, 2020: $0.2 billion), while loans outstanding under the PPP in the U.S. were US$1.8 billion (October 31, 2020: US$1.9 billion).

 

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Real estate secured personal lending

Real estate secured personal lending comprises residential mortgages, and personal loans and lines secured by residential property. This portfolio is low risk, as we have a first charge on the majority of the properties and a second lien on only a small portion of the portfolio. We use the same lending criteria in the adjudication of both first lien and second lien loans.

The following table provides details on our residential mortgage and home equity line of credit (HELOC) portfolios:

 

    Residential mortgages (1)            HELOC (2)            Total  
$ billions, as at April 30, 2021   Insured      Uninsured             Uninsured             Insured      Uninsured  

Ontario (3)

  $ 27.5        23  %     $ 93.0        77  %       $ 10.0        100  %       $ 27.5        21  %     $ 103.0        79  % 

British Columbia and territories (4)

    9.5        21        36.4        79          3.9        100          9.5        19        40.3        81  

Alberta

    13.3        51        12.8        49          2.2        100          13.3        47        15.0        53  

Quebec

    5.8        34        11.5        66          1.2        100          5.8        31        12.7        69  

Central prairie provinces

    3.6        48        3.9        52          0.6        100          3.6        44        4.5        56  

Atlantic provinces

    3.9        46        4.6        54                0.7        100                3.9        42        5.3        58  

Canadian portfolio (5)(6)

    63.6        28        162.2        72          18.6        100          63.6        26        180.8        74  

U.S. portfolio (5)

                  1.9        100                                        1.9        100  

Other international portfolio (5)

                  2.3        100                                                    2.3        100  

Total portfolio

  $ 63.6        28  %     $ 166.4        72  %             $ 18.6        100  %             $ 63.6        26  %     $ 185.0        74  % 

October 31, 2020

  $     67.0        31  %     $     149.0        69  %             $     19.6        100  %             $     67.0        28  %     $     168.6        72  % 
(1)

Balances reflect principal values.

(2)

We did not have any insured HELOCs as at April 30, 2021 and October 31, 2020.

(3)

Includes $12.8 billion (October 31, 2020: $13.8 billion) of insured residential mortgages, $59.8 billion (October 31, 2020: $53.4 billion) of uninsured residential mortgages, and $5.8 billion (October 31, 2020: $6.1 billion) of HELOCs in the Greater Toronto Area (GTA).

(4)

Includes $4.2 billion (October 31, 2020: $4.5 billion) of insured residential mortgages, $25.2 billion (October 31, 2020: $22.9 billion) of uninsured residential mortgages, and $2.4 billion (October 31, 2020: $2.5 billion) of HELOCs in the Greater Vancouver Area (GVA).

(5)

Geographic location is based on the address of the property.

(6)

67% (October 31, 2020: 71%) of insurance on Canadian residential mortgages is provided by Canada Mortgage and Housing Corporation (CMHC) and the remaining by two private Canadian insurers, both rated at least AA (low) by DBRS Limited (DBRS).

The average loan-to-value (LTV) ratios(1) for our uninsured residential mortgages and HELOCs originated and acquired during the quarter and six months ended April 30, 2021 are provided in the following table.

 

   

For the three

months ended

         

For the six

months ended

 
   

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30

         

2021

Apr. 30

   

2020

Apr. 30

 
     Residential
mortgages
    HELOC     Residential
mortgages
    HELOC     Residential
mortgages
    HELOC           Residential
mortgages
    HELOC     Residential
mortgages
    HELOC  

Ontario (2)

    63  %      68  %      63  %      68  %      64  %      67  %        63  %      68  %      63  %      67  % 

British Columbia and territories (3)

    60       66       59       66       60       64         60       66       60       64  

Alberta

    68       74       66       73       69       73         67       73       69       72  

Quebec

    68       73       68       74       68       73         68       73       68       72  

Central prairie provinces

    68       75       68       75       69       74         68       75       69       74  

Atlantic provinces

    70       75       68       75       72       75         69       75       72       74  

Canadian portfolio (4)

    63  %      69  %      63  %      69  %      64  %      68  %        63  %      69  %      64  %      68  % 

U.S. portfolio (4)

    64  %      71  %      63  %      63  %      67  %      68  %        62  %      67  %      66  %      65  % 

Other international portfolio (4)

    76  %      n/m       76  %      n/m       73  %      n/m         76  %      n/m       71  %      n/m  
(1)

LTV ratios for newly originated residential mortgages and HELOCs are calculated based on weighted average.

(2)

Average LTV ratios for our uninsured GTA residential mortgages originated during the quarter were 63% (January 31, 2021: 63%; April 30, 2020: 62%) and 63% for the six months ended April 30, 2021 (April 30, 2020: 61%).

(3)

Average LTV ratios for our uninsured GVA residential mortgages originated during the quarter were 58% (January 31, 2021: 57%; April 30, 2020: 58%) and 58% for the six months ended April 30, 2021 (April 30, 2020: 57%).

(4)

Geographic location is based on the address of the property.

n/m

Not meaningful.

The following table provides the average LTV ratios on our total Canadian residential mortgage portfolio:

 

      Insured     Uninsured  

April 30, 2021 (1)(2)

     54  %      51  % 

October 31, 2020 (1)(2)

     55  %      52  % 
(1)

LTV ratios for residential mortgages are calculated based on weighted average. The house price estimates for April 30, 2021 and October 31, 2020 are based on the Forward Sortation Area level indices from the Teranet – National Bank National Composite House Price Index (Teranet) as of March 31, 2021 and September 30, 2020, respectively. Teranet is an independent estimate of the rate of change in Canadian home prices.

(2)

Average LTV ratio on our uninsured GTA residential mortgage portfolio was 49% (October 31, 2020: 48%). Average LTV ratio on our uninsured GVA residential mortgage portfolio was 47% (October 31, 2020: 46%).

 

CIBC SECOND QUARTER 2021     25  


Table of Contents

The tables below summarize the remaining amortization profile of our total Canadian, U.S. and other international residential mortgages. The first table provides the remaining amortization periods based on the minimum contractual payment amounts. The second table provides the remaining amortization periods based upon current customer payment amounts, which incorporate payments other than the minimum contractual amount and/or a different frequency of payments.

Contractual payment basis

     

0–5

years

    

>5–10

years

    

>10–15

years

    

>15–20

years

    

>20–25

years

    

>25–30

years

    

>30–35

years

    

>35

years

 

Canadian portfolio

                       

April 30, 2021

     –       –                 56       35       –       – 

October 31, 2020

     –                      54       36       –       – 

U.S. portfolio

                       

April 30, 2021

     –                           88       –       – 

October 31, 2020

     –                           89       –       – 

Other international portfolio

                       

April 30, 2021

     14       15       23       23       18            –       – 

October 31, 2020

     11       15       23       23       18       10       –       – 

Current customer payment basis

     

0–5

years

    

>5–10

years

    

>10–15

years

    

>15–20

years

    

>20–25

years

    

>25–30

years

    

>30–35

years

    

>35

years

 

Canadian portfolio

                       

April 30, 2021

                    18       44       26       –       – 

October 31, 2020

                    18       44       25       –       – 

U.S. portfolio

                       

April 30, 2021

                    10            70       –       – 

October 31, 2020

                    10       10       68       –       – 

Other international portfolio

                       

April 30, 2021

          13       22       23       19       15            – 

October 31, 2020

          13       22       23       19       14            – 

We have two types of condominium exposures in Canada: mortgages and developer loans. Both are primarily concentrated in the Toronto and Vancouver areas. As at April 30, 2021, our Canadian condominium mortgages were $31.4 billion (October 31, 2020: $28.1 billion) of which 28% (October 31, 2020: 31%) were insured. Our drawn developer loans were $1.4 billion (October 31, 2020: $1.4 billion) or 1.0% (October 31, 2020: 1.0%) of our business and government portfolio, and our related undrawn exposure was $4.5 billion (October 31, 2020: $4.5 billion). The condominium developer exposure is diversified across 104 projects.

We stress test our mortgage and HELOC portfolio to determine the potential impact of different economic events. Our stress tests can use variables such as unemployment rates, debt service ratios and housing price changes, to model potential outcomes for a given set of circumstances. The stress testing involves variables that could behave differently in certain situations. Our main tests use economic variables in a similar range or more conservative to historical events when Canada experienced economic downturns. Our results show that in an economic downturn, our strong capital position should be sufficient to absorb mortgage and HELOC losses.

On May 20, 2021, OSFI and the Department of Finance announced that effective June 1, 2021, the minimum qualifying rate for uninsured and insured mortgages will be the higher of the mortgage contract rate plus 2%, or 5.25%, as a minimum floor. The 5.25% replaces the Bank of Canada’s five-year benchmark posted mortgage rate that is currently applied, and OSFI as well as the Department of Finance will revisit it at least annually to ensure it remains appropriate for risks in the environment.

 

Trading credit exposure

We have trading credit exposure (also called counterparty credit exposure) that arises from our OTC derivatives and our repo-style transactions. The nature of our derivatives exposure and how it is mitigated is described in Note 13 to the consolidated financial statements included in our 2020 Annual Report. Our repo-style transactions consist of our securities bought or sold under repurchase agreements, and our securities borrowing and lending activity.

The following table shows the rating profile of OTC derivative mark-to-market (MTM) receivables:

 

$ billions, as at   

2021

Apr. 30

    

2020

Oct. 31 (1)

 
     Exposure (2)  

Investment grade

   $ 8.67        77.0  %     $ 7.45        74.8  % 

Non-investment grade

     2.48        22.0        2.40        24.1  

Watch list

     0.10        0.9        0.10        1.0  

Default

     0.01        0.1        0.01        0.1  
     $     11.26        100.0  %     $     9.96        100.0  % 
(1)

Restated from amounts previously presented.

(2)

MTM of OTC derivative contracts is after the impact of master netting agreements, but before any collateral.

 

26   CIBC SECOND QUARTER 2021


Table of Contents

Impaired loans

The following table provides details of our impaired loans and allowance for credit losses:

 

   

As at or for the three

months ended

         

As at or for the six

months ended

 
$ millions  

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30

         

2021

Apr. 30

   

2020

Apr. 30

 
     Business and
government
loans
    Consumer
loans
    Total     Business and
government
loans
    Consumer
loans
    Total     Business and
government
loans
    Consumer
loans
    Total           Business and
government
loans
    Consumer
loans
    Total    

Business and
government

loans

    Consumer
loans
    Total  

Gross impaired loans

                                   

Balance at beginning of period

  $   1,476     $     979     $   2,455     $ 1,359     $ 990     $ 2,349     $ 907     $ 995     $ 1,902       $ 1,359     $ 990     $ 2,349     $ 911     $ 955     $ 1,866  

Classified as impaired during the period

    192       534       726       407       433       840       316       558       874         599       967       1,566       460       1,083       1,543  

Transferred to performing during the period

    (33     (152     (185     (68     (201     (269     (10     (94     (104       (101     (353     (454     (20     (199     (219

Net repayments

    (118     (159     (277     (126     (84     (210     (79     (155     (234       (244     (243     (487     (179     (307     (486

Amounts written off

    (66     (250     (316     (70     (150     (220     (16     (228     (244       (136     (400     (536     (56     (457     (513

Recoveries of loans and advances previously written off

                                                                                           

Disposals of loans

    (31           (31                                           (31           (31                  

Purchased credit-impaired loans

                                                                                           

Foreign exchange and other

    (29     (9     (38     (26     (9     (35     26       12       38         (55     (18     (73     28       13       41  

Balance at end of period

  $ 1,391     $ 943     $ 2,334     $   1,476     $     979     $   2,455     $   1,144     $   1,088     $   2,232       $   1,391     $   943     $   2,334     $   1,144     $   1,088     $   2,232  

Allowance for credit losses – impaired loans

                                   

Balance at beginning of period

  $ 686     $ 266     $ 952     $ 650     $ 264     $ 914     $ 391     $ 267     $ 658       $ 650     $ 264     $ 914     $ 376     $ 268     $ 644  

Amounts written off (1)

    (66     (250     (316     (70     (150     (220     (16     (228     (244       (136     (400     (536     (56     (457     (513

Recoveries of amounts written off in previous periods

    5       50       55       3       45       48       3       42       45         8       95       103       6       91       97  

Charge to income statement (2)

    15       231       246       121       117       238       134       209       343         136       348       484       192       395       587  

Interest accrued on impaired loans

    (5     (6     (11     (6     (5     (11     (3     (6     (9       (11     (11     (22     (8     (12     (20

Foreign exchange and other

    (15     (5     (20     (12     (5     (17     10       4       14         (27     (10     (37     9       3       12  

Balance at end of period

  $ 620     $ 286     $ 906     $ 686     $ 266     $ 952     $ 519     $ 288     $ 807       $ 620     $ 286     $ 906     $ 519     $ 288     $ 807  

Net impaired loans (3)

                                   

Balance at beginning of period

  $ 790     $ 713     $ 1,503     $ 709     $ 726     $ 1,435     $ 516     $ 728     $ 1,244       $ 709     $ 726     $ 1,435     $ 535     $ 687     $ 1,222  

Net change in gross impaired

    (85     (36     (121     117       (11     106       237       93       330         32       (47     (15     233       133       366  

Net change in allowance

    66       (20     46       (36     (2     (38     (128     (21     (149       30       (22     8       (143     (20     (163

Balance at end of period

  $ 771     $ 657     $ 1,428     $ 790     $ 713     $ 1,503     $ 625     $ 800     $ 1,425       $ 771     $ 657     $ 1,428     $ 625     $ 800     $ 1,425  

Net impaired loans as a percentage of net loans and acceptances

                    0.33  %                      0.36  %                      0.34  %                        0.33  %                      0.34  % 
(1)

Includes the amount of allowance for credit losses on impaired loans that is written off on disposals of loans.

(2)

Excludes provision for credit losses on impaired undrawn credit facilities and other off-balance sheet exposures.

(3)

Net impaired loans are gross impaired loans net of stage 3 allowance for credit losses.

Gross impaired loans

As at April 30, 2021, gross impaired loans were $2,334 million, up $102 million from the same quarter last year, primarily due to increases in the real estate and construction, and utilities sectors, partially offset by a decrease in the Canadian residential mortgages portfolio and the impact of foreign exchange translation.

Gross impaired loans were down $121 million from the prior quarter, primarily due to decreases in the real estate and construction, and oil and gas sectors, the impact of foreign exchange translation, residential mortgages portfolio, and retail and wholesale sector, partially offset by increases in the financial institutions and utilities sectors.

58% of gross impaired loans related to Canada, of which the residential mortgages and personal lending portfolios, retail and wholesale, and utilities sectors accounted for the majority.

28% of gross impaired loans related to the U.S., of which the real estate and construction, oil and gas, and financial institutions sectors accounted for the majority.

The remaining gross impaired loans related to CIBC FirstCaribbean, of which the residential mortgages and personal lending portfolios, and the real estate and construction sector accounted for the majority.

Allowance for credit losses – impaired loans

Allowance for credit losses on impaired loans was $906 million, up $99 million from the same quarter last year, primarily due to increases in the utilities, real estate and construction, and retail and wholesale sectors, partially offset by a decrease driven by foreign exchange translation.

Allowance for credit losses on impaired loans was down $46 million from the prior quarter, primarily due to decreases in the oil and gas, and real estate and construction sectors, and the impact of foreign exchange translation, partially offset by an increase in the Canadian residential mortgages portfolio.

 

Loans contractually past due but not impaired

This comprises loans where repayment of principal or payment of interest is contractually in arrears. The following table provides an aging analysis of the contractually past due loans. Most risk rated business and government loans that were contractually past due at the time relief was provided pursuant to payment deferral programs were presented in the aging category that applied at the time deferrals were granted during the period of the deferral. Other business and government loans, credit cards, personal loans and residential mortgages that were subject to a payment deferral program were generally presented in the aging category that applied as at March 31, 2020 during the period of the deferral, which approximated the time when the majority of the deferrals were granted. Loans that have exited a deferral program generally continue to age based on the status that was applied at the beginning of the program to the extent a payment has not been made.

$ millions, as at                    2021
Apr. 30
     2020
Oct. 31 (1)
 
      31 to
90 days
     Over
90 days
     Total      Total  

Residential mortgages

   $ 672      $      $ 672      $ 1,152  

Personal

     159               159        222  

Credit card

     125        78        203        321  

Business and government

     301               301        281  
     $     1,257      $     78      $     1,335      $     1,976  
(1)

Excludes loans past due less than 30 days as such loans are not generally indicative of the borrowers’ ability to repay.

 

CIBC SECOND QUARTER 2021     27  


Table of Contents

Exposure to certain countries and regions

Europe

The following table provides our exposure to European countries, both within and outside the Eurozone.

Our direct exposures presented in the tables below comprise (A) funded – on-balance sheet loans (stated at amortized cost net of stage 3 allowance for credit losses, if any), deposits with banks (stated at amortized cost net of stage 3 allowance for credit losses, if any) and securities (stated at carrying value); (B) unfunded – unutilized credit commitments, letters of credit, and guarantees (stated at notional amount net of stage 3 allowance for credit losses, if any); and (C) derivative MTM receivables (stated at fair value) and repo-style transactions (stated at fair value).

Of our total direct exposures to Europe, approximately 39% (January 31, 2021: 43%) is to entities in countries with Aaa/AAA ratings from at least one of Moody’s Investors Service, Inc. (Moody’s) or Standard & Poor’s (S&P).

The following table provides a summary of our positions in this business:

 

Direct exposures

 

    Funded         Unfunded        
Derivative MTM receivables
and repo-style transactions (1)

 
 
$ millions, as at April 30, 2021   Corporate     Sovereign     Banks     Total
funded
(A)
           Corporate     Banks     Total
unfunded
(B)
           Corporate     Sovereign     Banks     Net
exposure
(C)
    Total direct
exposure
(A)+(B)+(C)
 

Austria

  $     $ 529     $ 57     $ 586       $     $ 4     $ 4       $     $     $     $     $ 590  

Finland

    51       1       406       458         119       6       125                                 583  

France

    19       42       80       141         357       52       409               3       38       41       591  

Germany

    451       1,267       228       1,946         180       106       286         48             36       84       2,316  

Greece

                                                                           

Ireland

    226             101       327         42             42         10             230       240       609  

Luxembourg

    135             2,266       2,401         86       45       131         3       26       40       69       2,601  

Netherlands

    297       485       186       968         400       241       641         32             3       35       1,644  

Norway

    205       332       89       626         596             596               3             3       1,225  

Spain

    93             8       101         8       27       35                                 136  

Sweden

    383       900       145       1,428         160             160         18             4       22       1,610  

Switzerland

    99             9       108         162             162         4             94       98       368  

United Kingdom

    2,637       1,881       1,545       6,063         3,163       310       3,473         508       9       620       1,137       10,673  

Other European countries

    62       63       62       187               12       92       104               1,995             6       2,001       2,292  

Total Europe

  $ 4,658     $ 5,500     $ 5,182     $ 15,340             $ 5,285     $ 883     $ 6,168             $ 2,618     $ 41     $ 1,071     $ 3,730     $ 25,238  

October 31, 2020

  $     4,275     $     3,598     $     5,157     $     13,030             $     5,063     $     968     $     6,031             $       788     $     92     $       835     $     1,715     $     20,776  
(1)

The amounts shown are net of CVA and collateral. Collateral on derivative MTM receivables was $1.6 billion (October 31, 2020: $1.8 billion), collateral on repo-style transactions was $33.3 billion (October 31, 2020: $30.3 billion), and both comprise cash and investment grade debt securities.

We have $2,024 million (January 31, 2021: $1,953 million) of indirect exposure to European entities, as we hold debt or equity securities issued by European entities as collateral for our derivatives transactions and securities borrowing and lending activity from counterparties that are not in Europe.

 

28   CIBC SECOND QUARTER 2021


Table of Contents

Market risk

 

Market risk is the risk of economic or financial loss in our trading and non-trading portfolios from adverse changes in underlying market factors, including interest rates, foreign exchange rates, equity market prices, commodity prices, credit spreads, and customer behaviour for retail products. Market risk arises in CIBC’s trading and treasury activities, and encompasses all market-related positioning and market-making activity.

The trading book consists of positions in financial instruments and commodities held to meet the near-term needs of our clients.

The non-trading book consists of positions in various currencies that are related to asset/liability management and investment activities.

Risk measurement

The following table provides balances on the interim consolidated balance sheet that are subject to market risk. Certain differences between accounting and risk classifications are detailed in the footnotes below:

 

$ millions, as at                       

2021

Apr. 30

                        

2020

Oct. 31

        
          Subject to market risk (1)                 Subject to market risk (1)              
    

Consolidated
balance

sheet

    Trading    

Non-

trading

   

Not

subject to

market risk

   

Consolidated
balance

sheet

    Trading    

Non-

trading

   

Not

subject to

market risk

   

Non-traded risk

primary risk

sensitivity

 

Cash and non-interest-bearing deposits with banks

  $ 26,924     $     $ 2,660     $ 24,264     $ 43,531     $     $ 2,445     $ 41,086       Foreign exchange  

Interest-bearing deposits with banks

    20,273       134       20,139             18,987       75       18,912             Interest rate  

Securities

    155,122       55,822       99,300             149,046       45,825       103,221             Interest rate, equity  

Cash collateral on securities borrowed

    11,573             11,573             8,547             8,547             Interest rate  

Securities purchased under resale agreements

    63,106             63,106             65,595             65,595             Interest rate  

Loans

                 

Residential mortgages

    234,747             234,747             221,165             221,165             Interest rate  

Personal

    42,371             42,371             42,222             42,222             Interest rate  

Credit card

    10,633             10,633             11,389             11,389             Interest rate  

Business and government

    136,567       22,086  (2)      114,481             135,546       22,643  (2)      112,903             Interest rate  

Allowance for credit losses

    (3,200           (3,200           (3,540           (3,540           Interest rate  

Derivative instruments

    35,313       33,214       2,099             32,730       31,244       1,486            
Interest rate,
foreign exchange
 
 

Customers’ liability under
acceptances

    11,002             11,002             9,606             9,606             Interest rate  

Other assets

    38,447       4,056       24,225       10,166       34,727       3,364       20,613       10,750      

Interest rate, equity,

foreign exchange

 

 

    $     782,878     $     115,312     $     633,136     $     34,430     $     769,551     $     103,151     $     614,564     $     51,836          

Deposits

  $ 576,563     $ 567  (3)    $ 508,396     $ 67,600     $ 570,740     $ 484  (3)    $ 510,788     $ 59,468       Interest rate  

Obligations related to securities sold short

    20,269       18,803       1,466             15,963       13,795       2,168             Interest rate  

Cash collateral on securities lent

    3,205             3,205             1,824             1,824             Interest rate  

Obligations related to securities sold under repurchase agreements

    66,120             66,120             71,653             71,653             Interest rate  

Derivative instruments

    34,121       32,819       1,302             30,508       29,436       1,072            
Interest rate,
foreign exchange
 
 

Acceptances

    11,071             11,071             9,649             9,649             Interest rate  

Other liabilities

    23,196       1,947       11,851       9,398       22,167       2,386       10,926       8,855       Interest rate  

Subordinated indebtedness

    5,653             5,653             5,712             5,712             Interest rate  
    $ 740,198     $ 54,136     $ 609,064     $ 76,998     $ 728,216     $ 46,101     $ 613,792     $ 68,323          
(1)

FVA are excluded from trading activities for regulatory capital purposes, with related derivative hedges to these FVA also excluded.

(2)

Excludes $241 million (October 31, 2020: $291 million) of loans that are warehoused for future securitization purposes. These are considered non-trading for market risk purposes.

(3)

Comprises FVO deposits which are considered trading for market risk purposes.

 

CIBC SECOND QUARTER 2021     29  


Table of Contents

Trading activities

We hold positions in traded financial contracts to meet client investment and risk management needs. Trading revenue (net interest income or non-interest income) is generated from these transactions. Trading instruments are recorded at fair value and include debt and equity securities, as well as interest rate, foreign exchange, equity, commodity, and credit derivative products.

Value-at-risk

Our value-at-risk (VaR) methodology is a statistical technique that measures the potential overnight loss at a 99% confidence level. We use a full revaluation historical simulation methodology to compute VaR, stressed VaR and other risk measures.

The following three tables show VaR, stressed VaR and incremental risk charge (IRC) for our trading activities based on risk type under an internal models approach.

Average total VaR for the three months ended April 30, 2021 was down $1.0 million from the prior quarter, driven primarily by an increase in diversification benefit and a decrease in foreign exchange risk, partially offset by an increase in interest rate and credit spread risks.

Average stressed total VaR for the three months ended April 30, 2021 was down $0.9 million from the prior quarter, driven by a decrease in foreign exchange risk. For the periods presented, our Stressed VaR windows were in the 2008-2009 Global Financial Crisis period. This historical period exhibited not only increased volatility in interest rates but also increased volatility in equity prices, combined with a reduction in the level of interest rates, and an increase in credit spreads.

Average IRC for the three months ended April 30, 2021 was up $27.0 million from the prior quarter, partially due to an increase in inventory of corporate bonds.

VaR by risk type – trading portfolio

                                      

As at or for the three

months ended

          As at or for the six
months ended
 
$ millions                        2021
Apr. 30
           2021
Jan. 31
           2020
Apr. 30
          2021
Apr. 30
    2020
Apr. 30
 
     High     Low     As at     Average     As at     Average     As at     Average           Average     Average  

Interest rate risk

  $12.0 12.0     $ 4.1     $ 10.3     $ 7.5     $ 5.2     $ 6.6     $ 7.4     $ 5.3       $ 7.1     $ 5.9  

Credit spread risk

    11.8       6.1       9.4       8.9       8.8       8.0       8.7       6.4         8.5       4.1  

Equity risk

    5.3       3.0       3.3       3.7       3.7       3.4       4.7       5.0         3.5       3.7  

Foreign exchange risk

    1.7       0.7       1.1       1.2       1.4       1.7       1.7       1.4         1.4       2.0  

Commodity risk

    5.2       1.1       1.1       3.1       3.2       3.1       7.9       2.6         3.1       2.8  

Debt specific risk

    5.7       2.1       3.5       3.5       4.1       3.2       2.5       2.2         3.3       2.1  

Diversification effect (1)

    n/m       n/m       (21.5     (21.1     (19.4     (18.2     (19.8     (11.0       (19.6     (11.7

Total VaR (one-day measure)

  $     10.0     $     4.6     $     7.2     $     6.8     $     7.0     $     7.8     $     13.1     $     11.9       $     7.3     $     8.9  
(1)

Total VaR is less than the sum of the VaR of the different market risk types due to risk offsets resulting from a portfolio diversification effect.

n/m

Not meaningful. It is not meaningful to compute a diversification effect because the high and low may occur on different days for different risk types.

Stressed VaR by risk type – trading portfolio

                                      

As at or for the three

months ended

          As at or for the six
months ended
 
$ millions                        2021
Apr. 30
           2021
Jan. 31
           2020
Apr. 30
          2021
Apr. 30
    2020
Apr. 30
 
     High     Low     As at     Average     As at     Average     As at     Average           Average     Average  

Interest rate risk

  $ 39.8     $ 13.6     $ 31.3     $ 23.7     $ 25.7     $ 24.4     $ 18.2     $ 17.7       $ 24.0     $ 22.7  

Credit spread risk

    12.1       5.7       6.8       8.9       10.2       9.8       9.2       10.1         9.3       10.1  

Equity risk

    14.8       2.5       6.4       8.1       13.6       8.9       3.7       7.2         8.5       4.7  

Foreign exchange risk

    12.1       0.2       2.1       2.4       15.7       10.7       11.8       6.7         6.5       8.9  

Commodity risk

    11.1       1.5       2.6       3.1       2.0       2.3       3.6       4.4         2.7       5.4  

Debt specific risk

    6.8       4.1       5.5       5.2       6.3       5.8       4.6       5.4         5.5       5.2  

Diversification effect (1)

    n/m       n/m       (27.5     (25.2     (43.5     (34.8     (28.8     (29.8       (29.9     (36.7

Stressed total VaR (one-day measure)

  $     40.0     $     17.6     $     27.2     $     26.2     $     30.0     $     27.1     $     22.3     $     21.7       $     26.6     $     20.3  
(1)

Stressed total VaR is less than the sum of the VaR of the different market risk types due to risk offsets resulting from a portfolio diversification effect.

n/m

Not meaningful. It is not meaningful to compute a diversification effect because the high and low may occur on different days for different risk types.

Incremental risk charge – trading portfolio

                                      

As at or for the three

months ended

         

As at or for the six

months ended

 
                   
$ millions                        2021
Apr. 30
           2021
Jan. 31
           2020
Apr. 30
          2021
Apr. 30
    2020
Apr. 30
 
     High     Low     As at     Average     As at     Average     As at     Average           Average     Average  

Default risk

  $ 208.8     $ 113.5     $ 152.3     $ 144.2     $ 130.5     $ 113.1     $ 128.9     $ 146.9       $ 128.9     $ 152.2  

Migration risk

    74.9       43.5       67.5       55.0       50.5       59.1       79.7       82.3         57.0       76.3  

IRC (one-year measure) (1)

  $     266.4     $   164.3     $     219.8     $     199.2     $     181.0     $     172.2     $     208.6     $     229.2       $     185.9     $     228.5  
(1)

High and low IRC are not equal to the sum of the constituent parts, because the highs and lows of the constituent parts may occur on different days.

 

30   CIBC SECOND QUARTER 2021


Table of Contents

Trading revenue

Trading revenue (TEB) comprises both trading net interest income and non-interest income and excludes underwriting fees and commissions. Trading revenue (TEB) in the chart below excludes certain exited portfolios.

The trading revenue (TEB) versus VaR graph below shows the current quarter and the three previous quarters’ daily trading revenue (TEB) against the close of business day VaR measures.

During the quarter, trading revenue (TEB) was positive for 100% of the days. The largest gain of $14.2 million occurred on March 4, 2021, and it was attributed to normal course activity within the global markets line of business. Average daily trading revenue (TEB) was $7.1 million during the quarter, and the average daily TEB was $0.8 million.

Trading revenue (TEB)(1) versus VaR(2)

 

LOGO

 

(1)

Excludes certain month-end transfer pricing and other miscellaneous adjustments.

(2)

FVA are excluded from trading activities for regulatory capital purposes, with related derivative hedges to these FVA also excluded.

 

Non-trading activities

Structural interest rate risk (SIRR)

SIRR primarily consists of the risk arising due to mismatches in assets and liabilities, which do not arise from trading and trading-related businesses. The objective of SIRR management is to lock in product margins and deliver stable and predictable net interest income over time, while managing the risk to the economic value of our assets arising from changes in interest rates.

SIRR results from differences in the maturities or repricing dates of assets and liabilities, both on- and off-balance sheet, as well as from embedded optionality in retail products, and other product features that could affect the expected timing of cash flows, such as options to pre-pay loans or redeem term deposits prior to contractual maturity. A number of assumptions affecting cash flows, product re-pricing and the administration of rates underlie the models used to measure SIRR. The key assumptions pertain to the expected funding profile of mortgage rate commitments, fixed rate loan prepayment behaviour, term deposit redemption behaviour, the treatment of non-maturity deposits and equity. All assumptions are derived empirically based on historical client behaviour, balance sheet composition and product pricing with the consideration of possible forward-looking changes. All models and assumptions used to measure SIRR are subject to independent oversight by Risk Management. A variety of cash instruments and derivatives, primarily interest rate swaps, are used to manage these risks.

The following table shows the potential before-tax impact of an immediate and sustained 100 basis points increase and 25 basis points decrease in interest rates on projected 12-month net interest income and economic value of equity for our structural balance sheet, assuming no subsequent hedging. While an immediate and sustained shock of 100 basis points is typically applied, and notwithstanding the possibility of negative rates, due to the low interest rate environment in both Canada and the U.S. at the end of the quarter, an immediate downward shock of 25 basis points was applied while maintaining a floor on market and client interest rates at zero.

Structural interest rate sensitivity – measures

 

$ millions (pre-tax), as at            2021
Apr. 30
             2021
Jan. 31
             2020
Apr. 30
 
      CAD (1)      USD      CAD (1)      USD      CAD (1)      USD  

100 basis point increase in interest rates

                 

Increase (decrease) in net interest income

   $     362      $       77      $       384      $       42      $       296      $         47  

Increase (decrease) in present value of shareholders’ equity

     (608      (288      (564      (365      (579      (257

25 basis point decrease in interest rates

                 

Increase (decrease) in net interest income

     (148      (50      (122      (66      (92      (70

Increase (decrease) in present value of shareholders’ equity

     83        27        77        40        107        (12
(1)

Includes CAD and other currency exposures.

 

CIBC SECOND QUARTER 2021     31  


Table of Contents

Liquidity risk

 

Liquidity risk is the risk of having insufficient cash or its equivalent in a timely and cost-effective manner to meet financial obligations as they come due. Common sources of liquidity risk inherent in banking services include unanticipated withdrawals of deposits, the inability to replace maturing debt, credit and liquidity commitments, and additional pledging or other collateral requirements.

CIBC’s approach to liquidity risk management supports our business strategy, aligns with our risk appetite and adheres to regulatory expectations.

Our management strategies, objectives and practices are regularly reviewed to align with changes to the liquidity environment, including regulatory, business and/or market developments. Liquidity risk remains within CIBC’s risk appetite.

Governance and management

We manage liquidity risk in a manner that enables us to withstand a liquidity stress event without an adverse impact on the viability of our operations. Actual and anticipated cash flows generated from on- and off-balance sheet exposures are routinely measured and monitored to ensure compliance with established limits. CIBC incorporates stress testing into its management and measurement of liquidity risk. Stress test results assist with the development of our liquidity assumptions, identification of potential constraints to funding planning, and contribute to the design of CIBC’s contingency funding plan.

The Global Asset Liability Committee (GALCO) governs CIBC’s liquidity risk management, ensuring the liquidity risk management methodologies, assumptions, and key metrics such as the Liquidity Horizon, are regularly reviewed and consider CIBC’s business activities. The Liquidity Risk Management Committee, a subcommittee of GALCO, is responsible for ensuring that CIBC’s liquidity risk profile is comprehensively measured and managed in alignment with CIBC’s strategic direction, risk appetite and regulatory requirements.

The Risk Management Committee (RMC) approves CIBC’s liquidity risk management policy and recommends liquidity risk tolerance to the Board through the risk appetite statement.

 

Liquid assets

Available liquid assets include unencumbered cash and marketable securities from on- and off-balance sheet sources that can be used to access funding in a timely fashion. Encumbered liquid assets, composed of assets pledged as collateral and those assets that are deemed restricted due to legal, operational, or other purposes, are not considered as sources of available liquidity when measuring liquidity risk.

Encumbered and unencumbered liquid assets from on- and off-balance sheet sources are summarized as follows:

 

$ millions, as at    Bank owned
liquid assets
     Securities received
as collateral
     Total liquid
assets
     Encumbered
liquid assets
    Unencumbered
liquid assets (1)
 

2021

  

Cash and deposits with banks

   $ 47,197      $      $ 47,197      $ 283     $ 46,914  

Apr. 30

  

Securities issued or guaranteed by sovereigns, central banks, and multilateral development banks

     109,774        99,748        209,522        126,679       82,843  
   Other debt securities      4,779        3,969        8,748        2,401       6,347  
   Equities      36,398        20,191        56,589        23,667       32,922  
  

Canadian government guaranteed National Housing Act mortgage-backed securities

     37,459        317        37,776        13,577       24,199  
     Other liquid assets (2)      14,409        3,164        17,573        8,013       9,560  
          $ 250,016      $ 127,389      $ 377,405      $ 174,620     $ 202,785  

2020

   Cash and deposits with banks    $ 62,518      $      $ 62,518      $ 133     $ 62,385  

Oct. 31

  

Securities issued or guaranteed by sovereigns, central banks, and multilateral development banks

     112,403        92,202        204,605        108,425       96,180  
   Other debt securities      4,798        4,288        9,086        2,603       6,483  
   Equities      27,169        15,924        43,093        21,449       21,644  
  

Canadian government guaranteed National Housing Act mortgage-backed securities

     40,592        895        41,487        13,084       28,403  
     Other liquid assets (2)      10,909        2,109        13,018        5,441       7,577  
          $     258,389      $     115,418      $     373,807      $     151,135     $     222,672  
(1)

Unencumbered liquid assets are defined as on-balance sheet assets, assets borrowed or purchased under resale agreements, and other off-balance sheet collateral received less encumbered liquid assets.

(2)

Includes cash pledged as collateral for derivatives transactions, select asset-backed securities and precious metals.

The following table summarizes unencumbered liquid assets held by CIBC (parent) and its domestic and foreign subsidiaries:

 

$ millions, as at   

2021

Apr. 30

    

2020

Oct. 31

 

CIBC (parent)

   $     145,170      $     170,936  

Domestic subsidiaries

     14,324        12,355  

Foreign subsidiaries

     43,291        39,381  
     $ 202,785      $ 222,672  

Asset haircuts and monetization depth assumptions under a liquidity stress scenario are applied to determine asset liquidity value. Haircuts take into consideration those margins applicable at central banks – such as the Bank of Canada and the U.S. Federal Reserve Bank – historical observations, and securities characteristics including asset type, issuer, credit ratings, currency and remaining term to maturity, as well as available regulatory guidance.

Our unencumbered liquid assets decreased by $19.9 billion since October 31, 2020, as a result of forecasted funding repayments from available cash positions.

Furthermore, CIBC maintains access eligibility to the Bank of Canada’s Emergency Lending Assistance program and the U.S. Federal Reserve Bank’s Discount Window.

 

32   CIBC SECOND QUARTER 2021


Table of Contents

Asset encumbrance

 

In the course of CIBC’s day-to-day operations, securities and other assets are pledged to secure obligations, participate in clearing and settlement systems and other collateral management purposes.

The following table provides a summary of our on- and off-balance sheet encumbered and unencumbered assets:

 

          Encumbered            Unencumbered           Total assets  
$ millions, as at    Pledged as
collateral
     Other (1)             Available as
collateral
    Other (2)                

2021

   Cash and deposits with banks    $      $ 283        $ 46,914     $       $ 47,197  

Apr. 30

   Securities      146,363        2,087          130,065               278,515  
   Loans, net of allowance (3)      1,916        40,758          31,245       347,199         421,118  
     Other assets      7,697                       3,776       73,289               84,762  
          $ 155,976      $ 43,128              $ 212,000     $ 420,488             $ 831,592  

2020

   Cash and deposits with banks    $      $ 133        $ 62,385     $       $ 62,518  

Oct. 31

   Securities      127,974        678          132,493               261,145  
   Loans, net of allowance (3)      7,946        42,291          34,103       322,441         406,781  
     Other assets      4,950                       2,731       69,382               77,063  
          $     140,870      $     43,102              $     231,712     $     391,823             $     807,507  
(1)

Includes assets supporting CIBC’s long-term funding activities and assets restricted for legal or other reasons, such as restricted cash.

(2)

Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral, however they are not considered immediately available to existing borrowing programs.

(3)

Loans included as available as collateral represent the loans underlying National Housing Act mortgage-backed securities and Federal Home Loan Banks eligible loans.

 

Restrictions on the flow of funds

Our subsidiaries are not subject to significant restrictions that would prevent transfers of funds, dividends or capital distributions. However, certain subsidiaries have different capital and liquidity requirements, established by applicable banking and securities regulators.

We monitor and manage our capital and liquidity requirements across these entities to ensure that resources are used efficiently and entities are in compliance with local regulatory and policy requirements.

Liquidity coverage ratio

The objective of the LCR is to promote short-term resilience of a bank’s liquidity risk profile, ensuring that it has adequate unencumbered high quality liquid resources to meet its liquidity needs in a 30-day acute stress scenario. Canadian banks are required to achieve a minimum LCR value of 100%. CIBC is in compliance with this requirement.

In accordance with the calibration methodology contained in OSFI’s Liquidity Adequacy Requirements (LAR) Guideline, CIBC reports the LCR to OSFI on a monthly basis. The ratio is calculated as the total of unencumbered high quality liquid assets (HQLA) over the total net cash outflows in the next 30 calendar days.

The LCR’s numerator consists of unencumbered HQLA, which follow an OSFI-defined set of eligibility criteria that considers fundamental and market-related characteristics, and the relative ability to operationally monetize assets on a timely basis during a period of stress. CIBC’s centrally managed liquid asset portfolio includes those liquid assets reported in the HQLA, such as central government treasury bills and bonds, central bank deposits and high-rated sovereign, agency, provincial, and corporate securities. Asset eligibility limitations inherent in the LCR metric do not necessarily reflect CIBC’s internal assessment of its ability to monetize its marketable assets under stress.

The ratio’s denominator reflects net cash outflows expected in the LCR’s stress scenario over the 30-calendar-day period. Expected cash outflows represent LCR-defined withdrawal or draw-down rates applied against outstanding liabilities and off-balance sheet commitments, respectively. Significant contributors to CIBC’s LCR outflows include business and financial institution deposit run-off, draws on undrawn lines of credit and unsecured debt maturities. Cash outflows are partially offset by cash inflows, which are calculated at LCR-prescribed inflow rates, and include performing loan repayments and maturing non-HQLA marketable assets.

Furthermore, CIBC reports the LCR to OSFI in multiple currencies, and thus measures the extent of potential currency mismatch under the ratio. CIBC predominantly operates in major currencies with deep and fungible foreign exchange markets.

During a period of financial stress, institutions may use their stock of HQLA, thereby falling below 100%, as maintaining the LCR at 100% under such circumstances could produce undue negative effects on the institution and other market participants.

 

CIBC SECOND QUARTER 2021     33  


Table of Contents

The LCR is disclosed using a standard OSFI-prescribed disclosure template.

 

$ millions, average of the three months ended April 30, 2021    Total unweighted value (1)      Total weighted value (2)  

HQLA

     

1

 

HQLA

     n/a      $ 178,970  

Cash outflows

     

2

 

Retail deposits and deposits from small business customers, of which:

   $     206,139        15,381  

3

 

Stable deposits

     89,438        2,683  

4

 

Less stable deposits

     116,701        12,698  

5

 

Unsecured wholesale funding, of which:

     200,614        99,741  

6

 

Operational deposits (all counterparties) and deposits in networks of cooperative banks

     69,363        16,777  

7

 

Non-operational deposits (all counterparties)

     106,286        57,999  

8

 

Unsecured debt

     24,965        24,965  

9

 

Secured wholesale funding

     n/a        5,054  

10

 

Additional requirements, of which:

     124,908        28,853  

11

 

Outflows related to derivative exposures and other collateral requirements

     19,026        10,125  

12

 

Outflows related to loss of funding on debt products

     2,219        2,219  

13

 

Credit and liquidity facilities

     103,663        16,509  

14

 

Other contractual funding obligations

     3,223        3,223  

15

 

Other contingent funding obligations

     314,255        6,193  

16

 

Total cash outflows

     n/a        158,445  

Cash inflows

     

17

 

Secured lending (e.g. reverse repos)

     80,356        12,300  

18

 

Inflows from fully performing exposures

     18,345        9,295  

19

 

Other cash inflows

     3,630        3,630  

20

 

Total cash inflows

   $ 102,331      $ 25,225  
          Total adjusted value  

21

 

Total HQLA

     n/a      $ 178,970  

22

 

Total net cash outflows

     n/a      $ 133,220  

23

 

LCR

     n/a        134  % 

$ millions, average of the three months ended January 31, 2021

              Total adjusted value  

24

 

Total HQLA

     n/a      $ 190,484  

25

 

Total net cash outflows

     n/a      $     133,693  

26

 

LCR

     n/a        142  % 
(1)

Unweighted inflow and outflow values are calculated as outstanding balances maturing or callable within 30 days of various categories or types of liabilities, off-balance sheet items or contractual receivables.

(2)

Weighted values are calculated after the application of haircuts (for HQLA) and inflow and outflow rates prescribed by OSFI.

n/a

Not applicable as per the LCR common disclosure template.

Our average LCR as at April 30, 2021 decreased to 134% from 142% in the prior quarter, largely due to forecasted term funding repayments from cash and liquid assets.

Net stable funding ratio (NSFR)

Derived from the BCBS’s Basel III framework and incorporated into OSFI’s LAR Guideline, the NSFR standard aims to promote long-term resilience of the financial sector by requiring banks to maintain a sustainable funding profile in relation to the composition of their assets and off-balance sheet activities. Canadian D-SIBs are required to maintain a minimum NSFR value of 100% on a consolidated bank basis. CIBC is in compliance with this requirement.

In accordance with the calibration methodology contained in OSFI’s LAR Guideline, CIBC reports the NSFR to OSFI on a quarterly basis. The ratio is calculated as total available stable funding (ASF) over the total required stable funding (RSF).

The numerator consists of the portion of capital and liabilities considered reliable over a one-year time horizon. The NSFR considers longer-term sources of funding to be more stable than short-term funding and deposits from retail and commercial customers to be behaviourally more stable than wholesale funding of the same maturity. In accordance with CIBC’s funding strategy, key drivers of CIBC’s ASF include client deposits supplemented by secured and unsecured wholesale funding, and capital instruments.

The ratio’s denominator represents the amount of stable funding required based on the OSFI-defined liquidity characteristics and residual maturities of assets and off-balance sheet exposures. The NSFR ascribes varying degrees of RSF such that HQLA and short-term exposures are assumed to have a lower funding requirement than less liquid and longer-term exposures. CIBC’s RSF is largely driven by retail, commercial and corporate lending, investments in liquid assets, derivative exposures, and undrawn lines of credit and liquidity.

The ASF and RSF may be adjusted to zero for certain liabilities and assets that are determined to be interdependent if they meet the NSFR-defined criteria, which take into account the purpose, amount, cash flows, tenor and counterparties among other aspects to ensure the institution is acting solely as a pass-through unit for the underlying transactions. CIBC reports the liabilities arising from the Canada Mortgage Bonds (CMB) program and the corresponding encumbered assets as interdependent.

 

34   CIBC SECOND QUARTER 2021


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The NSFR is disclosed using an OSFI-prescribed disclosure template, which captures the key quantitative information based on liquidity characteristics unique to the NSFR as defined in the LAR Guideline. As a result, amounts presented in the below table may not allow for direct comparison with the interim consolidated financial statements.

 

         a      b     c      d     e         
         Unweighted value by residual maturity              
$ millions, as at April 30, 2021    No
maturity
     <6
months
    6 months
to <1 year
     >1 year     Weighted
value
        

ASF item

              

1

 

Capital

   $   44,043      $     $      $ 5,051     $ 49,093    

2

 

Regulatory capital

     44,043                     5,051       49,093    

3

 

Other capital instruments

                                  

4

 

Retail deposits and deposits from small business customers

     188,423        27,025       11,827        10,133       219,254    

5

 

Stable deposits

     88,493        10,889       7,405        6,532       107,980    

6

 

Less stable deposits

     99,930        16,136       4,422        3,601       111,274    

7

 

Wholesale funding

     142,622        148,904       30,076        57,352       159,513    

8

 

Operational deposits

     68,518        6,547                    37,533    

9

 

Other wholesale funding

     74,104        142,357       30,076        57,352       121,980    

10

 

Liabilities with matching interdependent assets

            2,239       1,627        14,384          

11

 

Other liabilities

            78,700 (1)       6,203    

12

 

NSFR derivative liabilities

        6,599 (1)      

13

 

All other liabilities and equity not included in the above categories

            48,494       133        23,474       6,203          

14

 

Total ASF

                                       434,063          

RSF item

              

15

 

Total NSFR HQLA

               14,464    

16

 

Deposits held at other financial institutions for operational purposes

            2,410              233       1,439    

17

 

Performing loans and securities

     57,299        94,763       40,418        271,811       298,455    

18

 

Performing loans to financial institutions secured by Level 1 HQLA

            20,487       3,239        127       2,983    

19

 

Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions

     390        29,215       3,852        7,966       13,531    

20

 

Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and public sector entities, of which:

     26,462        31,003       17,193        95,110       127,622    

21

 

With a risk weight of less than or equal to 35% under the Basel II standardized approach for credit risk

                                  

22

 

Performing residential mortgages, of which:

     17,879        12,944       15,505        164,744       139,480    

23

 

With a risk weight of less than or equal to 35% under the Basel II standardized approach for credit risk

     17,879        12,869       15,433        160,503       135,801    

24

 

Securities that are not in default and do not qualify as HQLA, including exchange-traded equities

     12,568        1,114       629        3,864       14,839    

25

 

Assets with matching interdependent liabilities

            2,239       1,627        14,384          

26

 

Other assets

     13,049        78,042 (1)       42,918    

27

 

Physical traded commodities, including gold

     3,776               3,209    

28

 

Assets posted as initial margin for derivative contracts and contributions to default funds of central counterparties

        7,692 (1)       6,538    

29

 

NSFR derivative assets

        10,379 (1)       3,780    

30

 

NSFR derivative liabilities before deduction of variation margin posted

        17,794 (1)       890    

31

 

All other assets not included in the above categories

     9,273        36,678       317        5,182       28,501    

32

 

Off-balance sheet items

              316,801 (1)       10,979          

33

 

Total RSF

                                     $   368,255          

34

 

NSFR

                                       118  %         
$ millions, as at January 31, 2021                                  Weighted
value
        

35

 

Total ASF

                                     $ 434,977          

36

 

Total RSF

                                     $ 356,746          

37

 

NSFR

                                       122  %         
(1)

No assigned time period per disclosure template design.

Our NSFR as at April 30, 2021 decreased to 118% from 122% in the prior quarter, due to an increase in lending in line with strategic business growth, partially offset by an increase in long-term funding.

CIBC considers the impact of its business decisions on the LCR, NSFR and other liquidity risk metrics that it regularly monitors as part of a robust liquidity risk management function. Variables that can impact the metrics month-over-month include, but are not limited to, items such as wholesale funding activities and maturities, strategic balance sheet initiatives, and transactions and market conditions affecting collateral.

Reporting of the LCR and NSFR is calibrated centrally by CIBC Treasury, in conjunction with CIBC’s SBUs and other functional groups.

Funding

 

CIBC funds its operations with client-sourced deposits, supplemented with a wide range of wholesale funding.

CIBC’s principal approach aims to fund its consolidated balance sheet with deposits primarily raised from personal and commercial banking channels. CIBC maintains a foundation of relationship-based core deposits, whose stability is regularly evaluated through internally developed statistical assessments.

We routinely access a range of short-term and long-term secured and unsecured funding sources diversified by geography, depositor type, instrument, currency and maturity. We raise long-term funding from existing programs including covered bonds, asset securitizations and unsecured debt.

 

CIBC SECOND QUARTER 2021     35  


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CIBC continuously evaluates opportunities to diversify into new funding products and investor segments in an effort to maximize funding flexibility and minimize concentration and financing costs. We regularly monitor wholesale funding levels and concentrations to internal limits consistent with our desired liquidity risk profile.

GALCO and RMC review and approve CIBC’s funding plan, which incorporates projected asset and liability growth, funding maturities, and output from our liquidity position forecasting.

The following table provides the contractual maturity profile of CIBC’s wholesale funding sources at their carrying values:

 

$ millions, as at April 30, 2021   Less than
1 month
    1–3
months
    3–6
months
    6–12
months
    Less than
1 year total
   

1–2

years

    Over
2 years
    Total  

Deposits from banks (1)

  $ 4,364     $ 684     $ 280     $ 93     $ 5,421     $     $     $ 5,421  

Certificates of deposit and commercial paper

    8,160       14,985       20,528       16,547       60,220                   60,220  

Bearer deposit notes and bankers’ acceptances

    226       1,011       1,052       189       2,478                   2,478  

Asset-backed commercial paper

                                               

Senior unsecured medium-term notes (2)

          1,930       1,540       3,644       7,114       9,101       26,331       42,546  

Senior unsecured structured notes

    31             220             251             98       349  

Covered bonds/asset-backed securities

               

Mortgage securitization

          1,832       413       1,641       3,886       2,570       12,071       18,527  

Covered bonds

          2,160       200       1,060       3,420       9,541       6,116       19,077  

Cards securitization

    790                         790             800       1,590  

Subordinated liabilities

                                        5,653       5,653  

Other

                                  246       8       254  
    $ 13,571     $ 22,602     $ 24,233     $ 23,174     $ 83,580     $ 21,458     $ 51,077     $ 156,115  

Of which:

               

Secured

  $ 790     $ 3,992     $ 613     $ 2,701     $ 8,096     $ 12,111     $ 18,987     $ 39,194  

Unsecured

    12,781       18,610       23,620       20,473       75,484       9,347       32,090       116,921  
    $ 13,571     $ 22,602     $ 24,233     $ 23,174     $ 83,580     $ 21,458     $ 51,077     $ 156,115  

October 31, 2020

  $     17,139     $     15,400     $     12,670     $     35,224     $     80,433     $     17,648     $     54,253     $     152,334  
(1)

Includes non-negotiable term deposits from banks.

(2)

Includes wholesale funding liabilities which are subject to conversion under bail-in regulations. See the “Capital management” section for additional details.

CIBC’s wholesale funding is diversified by currency as demonstrated in the table that follows:

 

$ billions, as at  

2021

Apr. 30

   

2020

Oct. 31

 

CAD

  $ 46.5       30  %    $ 50.8       33  % 

USD

    83.9       54       75.4       50  

Other

    25.7       16       26.1       17  
    $     156.1       100  %    $     152.3       100  % 

We manage liquidity risk in a manner that enables us to withstand severe liquidity stress events. Wholesale funding may present a higher risk of run-off in stress situations, and we maintain significant portfolios of unencumbered liquid assets to mitigate this risk. See the “Liquid assets” section for additional details.

Credit ratings

CIBC’s access to and cost of wholesale funding are dependent on multiple factors, among them credit ratings provided by rating agencies. Rating agencies’ opinions are based upon internal methodologies, and are subject to change based on factors including, but not limited to, financial strength, competitive position, macroeconomic backdrop and liquidity positioning.

Our credit ratings are summarized in the following table:

 

As at April 30, 2021      DBRS          Fitch          Moody’s          S&P  

Deposit/Counterparty (1)

     AA          AA          Aa2          A+  

Legacy senior debt (2)

     AA          AA          Aa2          A+  

Senior debt (3)

     AA(L)          AA-          A2          BBB+  

Subordinated indebtedness

     A(H)          A          Baa1          BBB+  

Subordinated indebtedness – NVCC (4)

     A(L)          A          Baa1          BBB  

Limited recourse capital notes – NVCC (4)

     BBB(H)          n/a          Baa3          BB+  

Preferred shares – NVCC (4)

     Pfd-2          n/a          Baa3          P-3(H)  

Short-term debt

     R-1(H)          F1+          P-1          A-1  

Outlook

     Stable          Negative          Stable          Stable  
(1)

DBRS Long-Term Issuer Rating; Moody’s Long-Term Deposit and Counterparty Risk Assessment Rating; S&P’s Issuer Credit Rating; Fitch Ratings Inc. (Fitch) Long-Term Deposit Rating and Derivative Counterparty Rating.

(2)

Includes senior debt issued prior to September 23, 2018 as well as senior debt issued on or after September 23, 2018 which is not subject to bail-in regulations.

(3)

Comprises liabilities which are subject to conversion under bail-in regulations. See the “Capital management” section for additional details.

(4)

Comprises instruments which are treated as NVCC in accordance with OSFI’s CAR Guideline.

n/a

Not applicable.

 

36   CIBC SECOND QUARTER 2021


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Additional collateral requirements for rating downgrades

We are required to deliver collateral to certain derivative counterparties in the event of a downgrade to our current credit risk rating. The collateral requirement is based on MTM exposure, collateral valuations, and collateral arrangement thresholds, as applicable. The following table presents the additional cumulative collateral requirements for rating downgrades:

 

$ billions, as at   

2021

Apr. 30

    

2020

Oct. 31

 

One-notch downgrade

     $    0.1      $     0.1  

Two-notch downgrade

     0.2        0.2  

Three-notch downgrade

     0.3        0.3  

Regulatory developments concerning liquidity

On March 27, 2020, as a COVID-19 support measure, OSFI had allowed a temporary increase to the covered bond limit from 5.5% to 10% of total assets to facilitate greater access to the Bank of Canada facilities. The temporary increase in the limit targeted covered bonds pledged directly to the Bank of Canada, with the limit relating to market instruments remaining at 5.5%. Effective April 6, 2021, as a result of improvements to liquidity and access to term funding, OSFI announced the unwinding of the temporary increase of the covered bond limit for deposit-taking institutions. CIBC remains compliant with the stipulated requirements.

Contractual obligations

Contractual obligations give rise to commitments of future payments affecting our short- and long-term liquidity and capital resource needs. These obligations include financial liabilities, credit and liquidity commitments, and other contractual obligations.

 

Assets and liabilities

The following table provides the contractual maturity profile of our on-balance sheet assets, liabilities and equity at their carrying values. Contractual analysis is not representative of CIBC’s liquidity risk exposure, however this information serves to inform CIBC’s management of liquidity risk, and provide input when modelling a behavioural balance sheet.

 

$ millions, as at April 30, 2021   Less than
1 month
   

1–3

months

   

3–6

months

   

6–9

months

    9–12
months
   

1–2

years

   

2–5

years

    Over
5 years
    No
specified
maturity
    Total  

Assets

                   

Cash and non-interest-bearing deposits with banks (1)

  $ 26,924     $     $     $     $     $     $     $     $     $ 26,924  

Interest-bearing deposits with banks

    20,273                                                       20,273  

Securities

    3,936       4,605       5,353       5,118       5,010       17,231       45,282       31,337       37,250       155,122  

Cash collateral on securities borrowed

    11,573                                                       11,573  

Securities purchased under resale agreements

    33,633       18,345       6,273       2,191       2,652       12                         63,106  

Loans

                   

Residential mortgages

    1,825       4,714       11,214       10,898       9,583       46,977       141,895       7,641             234,747  

Personal

    1,171       832       1,112       1,051       1,251       500       3,498       3,874       29,082       42,371  

Credit card

    223       447       670       670       670       2,679       5,274                   10,633  

Business and government

    18,864       6,566       5,682       6,230       8,696       24,331       41,967       15,999       8,232       136,567  

Allowance for credit losses

                                                    (3,200     (3,200

Derivative instruments

    2,078       4,225       3,603       3,902       1,636       4,355       7,313       8,201             35,313  

Customers’ liability under acceptances

    9,795       1,171       20             16                               11,002  

Other assets

                                                    38,447       38,447  
    $ 130,295     $ 40,905     $ 33,927     $ 30,060     $ 29,514     $ 96,085     $ 245,229     $ 67,052     $ 109,811     $ 782,878  

October 31, 2020 (2)

  $     141,033     $     32,738     $     41,413     $     32,267     $     28,499     $     101,338     $     224,276     $     69,248     $ 98,739     $ 769,551  

Liabilities

                   

Deposits (3)

  $ 29,851     $ 37,172     $ 35,218     $ 27,150     $ 23,102     $ 32,181     $ 47,244     $ 13,743     $ 330,902     $ 576,563  

Obligations related to securities sold short

    20,269                                                       20,269  

Cash collateral on securities lent

    3,205                                                       3,205  

Obligations related to securities sold under repurchase agreements

    47,141       14,725       1,285       407       2,217       345                         66,120  

Derivative instruments

    3,271       4,834       4,342       3,168       1,574       2,951       6,182       7,799             34,121  

Acceptances

    9,864       1,171       20             16                               11,071  

Other liabilities

    24       51       78       73       73       305       609       471       21,512       23,196  

Subordinated indebtedness

                                              5,653             5,653  

Equity

                                                    42,680       42,680  
    $ 113,625     $ 57,953     $ 40,943     $ 30,798     $ 26,982     $ 35,782     $ 54,035     $ 27,666     $ 395,094     $ 782,878  

October 31, 2020

  $ 98,552     $ 40,528     $ 58,834     $ 43,919     $ 26,555     $ 33,273     $ 58,938     $ 26,416     $     382,536     $     769,551  
(1)

Cash includes interest-bearing demand deposits with Bank of Canada.

(2)

Restated from amounts previously presented.

(3)

Comprises $207.0 billion (October 31, 2020: $202.2 billion) of personal deposits; $352.5 billion (October 31, 2020: $351.6 billion) of business and government deposits and secured borrowings; and $17.1 billion (October 31, 2020: $17.0 billion) of bank deposits.

The changes in the contractual maturity profile were primarily due to the natural migration of maturities and also reflect the impact of our regular business activities.

 

CIBC SECOND QUARTER 2021     37  


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Credit-related commitments

The following table provides the contractual maturity of notional amounts of credit-related commitments. Since a significant portion of commitments are expected to expire without being drawn upon, the total of the contractual amounts is not representative of future liquidity requirements.

 

$ millions, as at April 30, 2021   Less than
1 month
    1–3
months
    3–6
months
    6–9
months
    9–12
months
   

1–2

years

   

2–5

years

    Over
5 years
    No
specified
maturity (1)
    Total  

Unutilized credit commitments

  $ 1,182     $ 11,857     $ 3,578     $ 6,001     $ 5,125     $ 24,173     $ 45,924     $ 3,325     $ 181,930     $ 283,095  

Securities lending (2)

    40,200       3,919       4,977                                           49,096  

Standby and performance letters of credit

    2,782       2,606       2,500       3,030       2,578       575       667       66             14,804  

Backstop liquidity facilities

    369       136       672       10,071       241       181       36                   11,706  

Documentary and commercial letters of credit

    46       83       34       14       3       5       9                   194  

Other

    1,160                                                       1,160  
    $ 45,739     $ 18,601     $ 11,761     $ 19,116     $ 7,947     $ 24,934     $ 46,636     $ 3,391     $ 181,930     $ 360,055  

October 31, 2020

  $     39,474     $     24,451     $     11,188     $     8,798     $     6,427     $     20,638     $     51,245     $     1,714     $     173,157     $     337,092  
(1)

Includes $136.7 billion (October 31, 2020: $131.3 billion) of personal, home equity and credit card lines, which are unconditionally cancellable at our discretion.

(2)

Excludes securities lending of $3.2 billion (October 31, 2020: $1.8 billion) for cash because it is reported on the interim consolidated balance sheet.

Other contractual obligations

The following table provides the contractual maturities of other contractual obligations affecting our funding needs:

 

$ millions, as at April 30, 2021    Less than
1 month
     1–3
months
     3–6
months
     6–9
months
     9–12
months
    

1–2

years

     2–5
years
     Over
5 years
     Total  

Purchase obligations (1)

   $ 90      $ 251      $ 181      $ 156      $ 118      $ 428      $ 423      $ 318      $ 1,965  

Future lease commitments

            1        7        10        11        52        92        1,316        1,489  

Investment commitments

            2        2        1                      5        265        275  

Underwriting commitments

     210                                                         210  

Pension contributions (2)

     135                                                         135  
     $ 435      $ 254      $ 190      $ 167      $ 129      $ 480      $ 520      $ 1,899      $ 4,074  

October 31, 2020

   $     211      $     243      $     231      $     239      $     204      $     488      $     795      $     1,625      $     4,036  
(1)

Obligations that are legally binding agreements whereby we agree to purchase products or services with specific minimum or baseline quantities defined at fixed, minimum or variable prices over a specified period of time are defined as purchase obligations. Purchase obligations are included through to the termination date specified in the respective agreements, even if the contract is renewable. Many of the purchase agreements for goods and services include clauses that would allow us to cancel the agreement prior to expiration of the contract within a specific notice period. However, the amount above includes our obligations without regard to such termination clauses (unless actual notice of our intention to terminate the agreement has been communicated to the counterparty). The table excludes purchases of debt and equity instruments that settle within standard market time frames.

(2)

Includes estimated minimum funding contributions for our funded defined benefit pension plans in Canada, the U.S., the U.K., and the Caribbean. Estimated minimum funding contributions are included only for the next annual period ending October 31, 2021 as the minimum contributions are affected by various factors, such as market performance and regulatory requirements, and therefore are subject to significant variability.

Other risks

We also have policies and processes to measure, monitor and control other risks, including strategic, reputation, environmental and social, and operational risks, such as insurance, technology, information and cyber security, and regulatory compliance. These risks and related policies and processes have not changed significantly from those described on pages 80 to 82 of our 2020 Annual Report.

Accounting and control matters

Critical accounting policies and estimates

The interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” using IFRS as issued by the International Accounting Standards Board (IASB). A summary of significant accounting policies is presented in Note 1 to the consolidated financial statements included in our 2020 Annual Report. The interim consolidated financial statements have been prepared using the same accounting policies as CIBC’s consolidated financial statements as at and for the year ended October 31, 2020, except that CIBC adopted the “Conceptual Framework for Financial Reporting” (Conceptual Framework) and early adopted the “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16” (Phase 2 amendments) effective November 1, 2020.

There was no impact from the adoption of the Conceptual Framework.

The early adoption of the Phase 2 amendments as discussed under the “Other regulatory developments” section below required us to provide additional disclosure in Note 1 to our interim consolidated financial statements.

Certain accounting policies require us to make judgments and estimates, some of which relate to matters that are uncertain. The COVID-19 pandemic continues to result in increased level of judgment as discussed on pages 83 to 88 of our 2020 Annual Report, and could have a material impact on our financial results, particularly in regard to the estimation of ECLs.

During the six months ended April 30, 2021, improvements in our economic outlook resulted in a relatively moderate reduction in our stage 1 and stage 2 performing ECLs. Significant judgment was inherent in the forecasting of forward-looking information, including with regard to our base case assumption that the vaccination programs will continue on a mass scale in many countries over the spring and summer and that the vaccinations will be able to effectively respond to the emerging variants, allowing for stronger global recovery in the latter half of the year.

Changes in the judgments and estimates related to IFRS 9 can have a significant impact on the level of ECL allowance recognized and the period-over-period volatility of the provision for credit losses. See Note 6 to our consolidated financial statements in our 2020 Annual Report, and Note 6 to our interim consolidated financial statements for more information concerning the high level of judgment inherent in the estimation of ECL allowance, including the impact of COVID-19.

Accounting developments

For details on future accounting policy changes, refer to Note 1 to our interim consolidated financial statements and Note 32 to the consolidated financial statements included in our 2020 Annual Report.

 

38   CIBC SECOND QUARTER 2021


Table of Contents

Other regulatory developments

Reforms to interest rate benchmarks

Various interest rate and other indices that are deemed to be “benchmarks” (including LIBOR) are the subject of international regulatory guidance and proposals for reform. Regulators in various jurisdictions have pushed for the transition from Interbank Offered Rates (IBORs) to alternative benchmark rates (alternative rates), based upon risk-free rates determined using actual market transactions. The U.K.’s FCA originally announced in July 2017 that it would not compel banks to submit LIBOR rates after December 2021. In March 2021, the FCA and the ICE Benchmark Administrator (IBA) announced the dates for the cessation or loss of representativeness of various LIBOR rates including that GBP, EUR, CHF and JPY LIBORs will cease on December 31, 2021 and that most USD LIBOR tenors will cease on June 30, 2023. This announcement results in a fixed spread between the LIBOR rate and the alternative rate for a given tenor which will apply on the cessation of the relevant LIBOR rates. The extension for most USD LIBOR tenors until June 30, 2023 would allow many legacy contracts to mature before the cessation date, however, originations of new USD LIBOR-linked products would cease after the end of 2021.

The transition from current reference rates to alternative rates may adversely affect the value of, return on, or trading market for contracts linked to existing benchmarks. These developments may cause some LIBOR and other benchmarks to be discontinued.

A significant number of our derivative, securities, lending and deposit contracts reference various interest rate benchmarks, including contracts with maturity dates that extend beyond the cessation dates announced by the FCA in March 2021. In response to the proposed reforms to interest rate benchmarks, we have established an Enterprise IBOR Transition Program (Program) to manage and coordinate all aspects of the transition. Further details on the Program are included as part of the “Other regulatory developments” section of our 2020 Annual Report.

As a part of the Program, we have begun to transition existing IBOR based contracts to those that reference the new alternative rates, and are developing business processes to support the transition. We have started to remediate our non-USD LIBOR referenced contracts by incorporating appropriate fallback language, and have ceased the issuance of certain new GBP LIBOR referencing products that mature after the end of 2021 based upon the guidelines provided by regulators. We have adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol to facilitate the transition of the contractual rate for derivatives with counterparties who have also adhered to the ISDA Protocol. Such transition will be effective on the occurrence of certain prescribed trigger events. We have continued to develop contract remediation plans for our LIBOR referencing products and have continued to make information available to clients, advising them on developments.

We continue to assess the impact of IBOR reform on our operations, engage with industry associations on ongoing developments on the transition to risk-free rates, and continue to incorporate recent developments into our project plan. The Program provides regular updates to senior management including the Executive Committee, and the Board.

Current accounting policy changes relating to the interest rate benchmark reform

The IASB addressed interest rate benchmark reform and its effects on financial reporting in two phases. The first phase focuses on issues affecting financial reporting in the period before the interest rate benchmark reform, while the second phase focuses on the issues that affect financial reporting once the existing rate is replaced with an alternative rate. In September 2019, the IASB finalized the first phase through the issuance of “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7” (Phase 1 amendments). We elected to early-adopt the Phase 1 amendments effective November 1, 2019. The financial accounting and reporting impact of the early adoption of the Phase 1 amendments was described in Note 1 to our 2020 Annual Report.

In August 2020, the IASB finalized the second phase through the issuance of “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16” (Phase 2 amendments), which addresses the issues that affect financial reporting once the existing rate is replaced with an alternative rate and provides specific disclosure requirements. The Phase 2 amendments are effective for annual periods beginning on or after January 1, 2021. As we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9, the Phase 2 amendments to IAS 39, IFRS 7, IFRS 4 and IFRS 16 will apply to us, mandatorily effective on November 1, 2021, with earlier application permitted. We elected to early adopt the Phase 2 amendments effective November 1, 2020. As a result, we have provided additional disclosures related to our exposures to significant benchmark rates subject to the reform in Note 1 to our interim consolidated financial statements.

Controls and procedures

Disclosure controls and procedures

CIBC’s management, with the participation of the President and Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of CIBC’s disclosure controls and procedures as at April 30, 2021 (as defined in the rules of the SEC and the Canadian Securities Administrators). Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer have concluded that such disclosure controls and procedures were effective.

Changes in internal control over financial reporting

There have been no changes in CIBC’s internal control over financial reporting during the quarter ended April 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Related-party transactions

There have been no significant changes to CIBC’s procedures and policies regarding related-party transactions since October 31, 2020. For additional information, refer to pages 90 and 183 of our 2020 Annual Report.

 

CIBC SECOND QUARTER 2021     39  


Table of Contents

Interim consolidated financial statements

(Unaudited)

 

Contents
41   Consolidated balance sheet
42   Consolidated statement of income
43   Consolidated statement of comprehensive income
44   Consolidated statement of changes in equity
45   Consolidated statement of cash flows
46   Notes to the interim consolidated financial statements

 

 

46   Note 1     Changes in accounting policies
47   Note 2     Impact of COVID-19
48   Note 3     Fair value measurement
52   Note 4     Significant transactions
52   Note 5     Securities
54   Note 6     Loans
60   Note 7     Deposits
60   Note 8     Subordinated indebtedness
61   Note 9     Share capital
61   Note 10     Post-employment benefits
62   Note 11     Income taxes
62   Note 12     Earnings per share
63   Note 13     Contingent liabilities and provisions
64   Note 14     Interest income and expense
64   Note 15     Segmented information
 

 

 

 

 

40   CIBC SECOND QUARTER 2021


Table of Contents

Consolidated balance sheet

 

Unaudited, millions of Canadian dollars, as at   

2021

Apr. 30

   

2020

Oct. 31

 

ASSETS

    

Cash and non-interest-bearing deposits with banks

   $ 26,924     $ 43,531  

Interest-bearing deposits with banks

     20,273       18,987  

Securities (Note 5)

     155,122       149,046  

Cash collateral on securities borrowed

     11,573       8,547  

Securities purchased under resale agreements

     63,106       65,595  

Loans (Note 6)

    

Residential mortgages

     234,747       221,165  

Personal

     42,371       42,222  

Credit card

     10,633       11,389  

Business and government

     136,567       135,546  

Allowance for credit losses

     (3,200     (3,540
       421,118       406,782  

Other

    

Derivative instruments

     35,313       32,730  

Customers’ liability under acceptances

     11,002       9,606  

Property and equipment

     2,826       2,997  

Goodwill

     4,928       5,253  

Software and other intangible assets

     1,944       1,961  

Investments in equity-accounted associates and joint ventures

     641       658  

Deferred tax assets

     433       650  

Other assets

     27,675       23,208  
       84,762       77,063  
     $     782,878     $     769,551  

LIABILITIES AND EQUITY

    

Deposits (Note 7)

    

Personal

   $ 207,028     $ 202,152  

Business and government

     313,201       311,426  

Bank

     17,140       17,011  

Secured borrowings

     39,194       40,151  
       576,563       570,740  

Obligations related to securities sold short

     20,269       15,963  

Cash collateral on securities lent

     3,205       1,824  

Obligations related to securities sold under repurchase agreements

     66,120       71,653  

Other

    

Derivative instruments

     34,121       30,508  

Acceptances

     11,071       9,649  

Deferred tax liabilities

     35       33  

Other liabilities

     23,161       22,134  
       68,388       62,324  

Subordinated indebtedness

     5,653       5,712  

Equity

    

Preferred shares and other equity instruments

     3,575       3,575  

Common shares (Note 9)

     14,130       13,908  

Contributed surplus

     119       117  

Retained earnings

     24,003       22,119  

Accumulated other comprehensive income (AOCI)

     683       1,435  

Total shareholders’ equity

     42,510       41,154  

Non-controlling interests

     170       181  

Total equity

     42,680       41,335  
     $ 782,878     $ 769,551  

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these interim consolidated financial statements.

 

CIBC SECOND QUARTER 2021     41  


Table of Contents

Consolidated statement of income

 

    For the three
months ended
           For the six
months ended
 
Unaudited, millions of Canadian dollars, except as noted  

2021

Apr. 30

    

2021

Jan. 31

    

2020

Apr. 30

          

2021

Apr. 30

    

2020

Apr. 30

 

Interest income (Note 14) (1)

                   

Loans

  $ 2,934      $ 3,071      $     3,658        $ 6,005      $ 7,644  

Securities

    529        569        698          1,098        1,428  

Securities borrowed or purchased under resale agreements

    79        90        278          169        642  
Deposits with banks     31        41        68          72        170  
      3,573        3,771        4,702          7,344        9,884  

Interest expense (Note 14)

                   

Deposits

    666        755        1,608          1,421        3,591  

Securities sold short

    62        56        63          118        138  

Securities lent or sold under repurchase agreements

    55        71        207          126        502  

Subordinated indebtedness

    28        35        44          63        90  
Other     15        15        18          30        40  
      826        932        1,940          1,758        4,361  
Net interest income     2,747        2,839        2,762          5,586        5,523  

Non-interest income

                   

Underwriting and advisory fees

    231        134        116          365        242  

Deposit and payment fees

    187        195        197          382        419  

Credit fees

    278        287        240          565        494  

Card fees

    104        123        85          227        207  

Investment management and custodial fees

    390        373        339          763        689  

Mutual fund fees

    427        424        384          851        793  

Insurance fees, net of claims

    81        97        95          178        197  

Commissions on securities transactions

    120        103        110          223        191  

Gains (losses) from financial instruments measured/designated at fair value through profit or loss (FVTPL), net

    178        213        73          391        338  

Gains (losses) from debt securities measured at fair value through other comprehensive income (FVOCI) and amortized cost, net

    22        36        (16        58        (5

Foreign exchange other than trading (FXOTT)

    78        69        68          147        126  

Income from equity-accounted associates and joint ventures

    16        16        24          32        42  
Other     73        54        101          127        177  
      2,185        2,124        1,816          4,309        3,910  
Total revenue     4,932        4,963        4,578          9,895        9,433  
Provision for credit losses (Note 6)     32        147        1,412          179        1,673  

Non-interest expenses

                   

Employee compensation and benefits

    1,598        1,564        1,479          3,162        3,376  

Occupancy costs

    194        193        215          387        421  

Computer, software and office equipment

    507        467        479          974        949  

Communications

    87        79        82          166        157  

Advertising and business development

    50        45        72          95        149  

Professional fees

    57        47        49          104        99  

Business and capital taxes

    27        31        29          58        65  

Other

    236        300        299          536        553  
      2,756        2,726        2,704          5,482        5,769  

Income before income taxes

    2,144        2,090        462          4,234        1,991  

Income taxes

    493        465        70          958        387  

Net income

  $ 1,651      $ 1,625      $ 392        $ 3,276      $ 1,604  

Net income (loss) attributable to non-controlling interests

  $ 4      $ 4      $ (8      $ 8      $ (1

Preferred shareholders and other equity instrument holders

  $ 51      $ 30      $ 30        $ 81      $ 61  

Common shareholders

    1,596        1,591        370          3,187        1,544  

Net income attributable to equity shareholders

  $     1,647      $     1,621      $ 400        $     3,268      $     1,605  

Earnings per share (in dollars) (Note 12)

                   

Basic

  $ 3.56      $ 3.56      $ 0.83        $ 7.12      $ 3.47  

Diluted

    3.55        3.55        0.83          7.10        3.46  

Dividends per common share (in dollars)

    1.46        1.46        1.46          2.92        2.90  
(1)

Interest income included $3.2 billion for the quarter ended April 30, 2021 (January 31, 2021: $3.4 billion; April 30, 2020: $4.2 billion) and $6.5 billion for the six months ended April 30, 2021 (April 30, 2020: $8.9 billion) calculated based on the effective interest rate method.

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these interim consolidated financial statements.

 

42   CIBC SECOND QUARTER 2021


Table of Contents

Consolidated statement of comprehensive income

 

    

For the three

months ended

          

For the six

months ended

 
Unaudited, millions of Canadian dollars   

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30

          

2021

Apr. 30

   

2020

Apr. 30

 

Net income

   $     1,651     $     1,625     $ 392        $ 3,276     $ 1,604  

Other comprehensive income (loss) (OCI), net of income tax, that is subject to subsequent reclassification to net income

 

        

Net foreign currency translation adjustments

                 

Net gains (losses) on investments in foreign operations

     (1,438     (1,417     1,795          (2,855     1,957  

Net gains (losses) on hedges of investments in foreign operations

     843       798       (990        1,641       (1,075
       (595     (619     805          (1,214     882  

Net change in debt securities measured at FVOCI

                 

Net gains (losses) on securities measured at FVOCI

     (72     56       47          (16     91  

Net (gains) losses reclassified to net income

     (16     (26     (4        (42     (10
       (88     30       43          (58     81  

Net change in cash flow hedges

                 

Net gains (losses) on derivatives designated as cash flow hedges

     30       124       43          154       32  

Net (gains) losses reclassified to net income

     (38     (148     150          (186     164  
       (8     (24     193          (32     196  

OCI, net of income tax, that is not subject to subsequent reclassification to net income

 

              

Net gains (losses) on post-employment defined benefit plans

     327       199       248          526       143  

Net gains (losses) due to fair value change of fair value option (FVO) liabilities

 

            

attributable to changes in credit risk

     20       (35     37          (15     15  

Net gains (losses) on equity securities designated at FVOCI

     21       24       (38        45       (2
       368       188       247          556       156  

Total OCI  (1)

     (323     (425     1,288          (748     1,315  

Comprehensive income

   $ 1,328     $ 1,200     $ 1,680        $ 2,528     $ 2,919  

Comprehensive income (loss) attributable to non-controlling interests

   $ 4     $ 4     $ (8      $ 8     $ (1

Preferred shareholders and other equity instrument holders

   $ 51     $ 30     $ 30        $ 81     $ 61  

Common shareholders

     1,273       1,166       1,658          2,439       2,859  

Comprehensive income attributable to equity shareholders

   $     1,324     $ 1,196     $     1,688        $     2,520     $     2,920  

(1)  Includes $25 million of losses for the quarter ended April 30, 2021 (January 31, 2021: $6 million of losses; April 30, 2020: $28 million of gains) and $31 million of losses for the six months ended April 30, 2021 (April 30, 2020: $24 million of gains), relating to our investments in equity-accounted associates and joint ventures.

   

    

For the three

months ended

          

For the six

months ended

 
Unaudited, millions of Canadian dollars   

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30

          

2021

Apr. 30

   

2020

Apr. 30

 

Income tax (expense) benefit allocated to each component of OCI

                 

Subject to subsequent reclassification to net income

                 

Net foreign currency translation adjustments

                 

Net gains (losses) on investments in foreign operations

   $ 42     $ 11     $ (14      $ 53     $ (15

Net gains (losses) on hedges of investments in foreign operations

     (46     (15     22          (61     22  
       (4     (4     8          (8     7  

Net change in debt securities measured at FVOCI

                 

Net gains (losses) on securities measured at FVOCI

     12       (25     1          (13     (11

Net (gains) losses reclassified to net income

     6       9       2          15       4  
       18       (16     3          2       (7

Net change in cash flow hedges

                 

Net gains (losses) on derivatives designated as cash flow hedges

     (10     (45     (15        (55     (11

Net (gains) losses reclassified to net income

     13       53       (54        66       (59
       3       8       (69        11       (70

Not subject to subsequent reclassification to net income

                 

Net gains (losses) on post-employment defined benefit plans

     (117     (71     (88        (188     (52

Net gains (losses) due to fair value change of FVO liabilities attributable

 

              

to changes in credit risk

     (8     13       (14        5       (6

Net gains (losses) on equity securities designated at FVOCI

     (7     (8     13          (15      
       (132     (66     (89        (198     (58
     $ (115   $ (78   $ (147      $ (193   $ (128

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these interim consolidated financial statements.

 

CIBC SECOND QUARTER 2021     43  


Table of Contents

Consolidated statement of changes in equity

 

    

For the three

months ended

          

For the six

months ended

 
Unaudited, millions of Canadian dollars   

2021

Apr. 30

   

2021

Jan. 31

   

2020

Apr. 30

          

2021

Apr. 30

    

2020

Apr. 30

 

Preferred shares and other equity instruments

                  

Balance at beginning of period

   $ 3,575     $ 3,575     $ 2,825        $ 3,575      $ 2,825  

Issue of preferred shares and limited recourse capital notes

                                  

Balance at end of period

   $ 3,575     $ 3,575     $ 2,825        $ 3,575      $ 2,825  

Common shares (Note 9)

                  

Balance at beginning of period

   $ 13,991     $ 13,908     $ 13,669        $ 13,908      $ 13,591  

Issue of common shares

     136       99       78          235        201  

Purchase of common shares for cancellation

                 (22               (68

Treasury shares

     3       (16     (3        (13      (2

Balance at end of period

   $ 14,130     $ 13,991     $ 13,722        $ 14,130      $ 13,722  

Contributed surplus

                  

Balance at beginning of period

   $ 119     $ 117     $ 123        $ 117      $ 125  

Compensation expense arising from equity-settled share-based awards

     8       6       4          14        7  

Exercise of stock options and settlement of other equity-settled share-based awards

     (18     (5     (7        (23      (11

Other

     10       1       (1        11        (2

Balance at end of period

   $ 119     $ 119     $ 119        $ 119      $ 119  

Retained earnings

                  

Balance at beginning of period before accounting policy changes

     n/a       n/a     $ 21,543          n/a      $ 20,972  

Impact of adopting IFRS 16 at November 1, 2019

     n/a       n/a       21          n/a        148  

Balance at beginning of period after accounting policy changes

   $ 23,060     $ 22,119       21,564        $ 22,119        21,120  

Net income attributable to equity shareholders

     1,647       1,621       400          3,268        1,605  

Dividends and distributions

                  

Preferred and other equity instruments

     (51     (30     (30        (81      (61

Common

     (655     (653     (649        (1,308      (1,290

Premium on purchase of common shares for cancellation

                 (47               (166

Realized gains (losses) on equity securities designated at FVOCI reclassified from AOCI

     1       3       2          4        31  

Other

     1             (2        1        (1

Balance at end of period

   $ 24,003     $ 23,060     $ 21,238        $ 24,003      $ 21,238  

AOCI, net of income tax

                  

AOCI, net of income tax, that is subject to subsequent reclassification to net income

                  

Net foreign currency translation adjustments

                  

Balance at beginning of period

   $ 554     $ 1,173     $ 1,070        $ 1,173      $ 993  

Net change in foreign currency translation adjustments

     (595     (619     805          (1,214      882  

Balance at end of period

   $ (41   $ 554     $ 1,875        $ (41    $ 1,875  

Net gains (losses) on debt securities measured at FVOCI

                  

Balance at beginning of period

   $ 339     $ 309     $ 115        $ 309      $ 77  

Net change in securities measured at FVOCI

     (88     30       43          (58      81  

Balance at end of period

   $ 251     $ 339     $ 158        $ 251      $ 158  

Net gains (losses) on cash flow hedges

                  

Balance at beginning of period

   $ 250     $ 274     $ 116        $ 274      $ 113  

Net change in cash flow hedges

     (8     (24     193          (32      196  

Balance at end of period

   $ 242     $ 250     $ 309        $ 242      $ 309  

AOCI, net of income tax, that is not subject to subsequent reclassification to net income

                  

Net gains (losses) on post-employment defined benefit plans

                  

Balance at beginning of period

   $ (84   $ (283   $ (468      $ (283    $ (363

Net change in post-employment defined benefit plans

     327       199       248          526        143  

Balance at end of period

   $ 243     $ (84   $ (220      $ 243      $ (220

Net gains (losses) due to fair value change of FVO liabilities attributable to changes in credit risk

                  

Balance at beginning of period

   $ (75   $ (40   $ (6      $ (40    $ 16  

Net change attributable to changes in credit risk

     20       (35     37          (15      15  

Balance at end of period

   $ (55   $ (75   $ 31        $ (55    $ 31  

Net gains (losses) on equity securities designated at FVOCI

                  

Balance at beginning of period

   $ 23     $ 2     $ 52        $ 2      $ 45  

Net gains (losses) on equity securities designated at FVOCI

     21       24       (38        45        (2

Realized gains (losses) on equity securities designated at FVOCI reclassified to retained earnings

     (1     (3     (2        (4      (31

Balance at end of period

   $ 43     $ 23     $ 12        $ 43      $ 12  

Total AOCI, net of income tax

   $ 683     $ 1,007     $ 2,165        $ 683      $ 2,165  

Non-controlling interests

                  

Balance at beginning of period

   $ 177     $ 181     $ 191        $ 181      $ 186  

Net income attributable to non-controlling interests

     4       4       (8        8        (1

Dividends

     (2           (9        (2      (11

Other

     (9     (8     10          (17      10  

Balance at end of period

   $ 170     $ 177     $ 184        $ 170      $ 184  

Equity at end of period

   $     42,680     $ 41,929     $     40,253        $     42,680      $ 40,253  
n/a

Not applicable.

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these interim consolidated financial statements.

 

44   CIBC SECOND QUARTER 2021


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Consolidated statement of cash flows

 

   

For the three

months ended

         

For the six

months ended

 
Unaudited, millions of Canadian dollars   2021
Apr. 30
    2021
Jan. 31
   

2020

Apr. 30

          2021
Apr. 30
    2020
Apr. 30
 

Cash flows provided by (used in) operating activities

               

Net income

  $ 1,651     $ 1,625     $ 392       $ 3,276     $ 1,604  

Adjustments to reconcile net income to cash flows provided by (used in) operating activities:

               

Provision for credit losses

    32       147       1,412         179       1,673  

Amortization and impairment (1)

    249       237       280         486       526  

Stock options and restricted shares expense

    8       6       4         14       7  

Deferred income taxes

    (29     43       (67       14       (160

Losses (gains) from debt securities measured at FVOCI and amortized cost

    (22     (36     16         (58     5  

Net losses (gains) on disposal of property and equipment

                3               4  

Other non-cash items, net

    430       82       (624       512       (692

Net changes in operating assets and liabilities

               

Interest-bearing deposits with banks

    34       (1,320     (1,726       (1,286     (4,184

Loans, net of repayments

    (11,056     (4,177     (18,853       (15,233     (22,969

Deposits, net of withdrawals

    1,479       1,628       43,555         3,107       56,273  

Obligations related to securities sold short

    793       3,513       (2,487       4,306       (696

Accrued interest receivable

    7       132       (98       139       53  

Accrued interest payable

    (125     (159     3         (284     (109

Derivative assets

    (1,159     (1,440     (15,084       (2,599     (16,440

Derivative liabilities

    1,952       1,688       15,675         3,640       15,927  

Securities measured at FVTPL

    (6,288     (3,864     5,859         (10,152     (3,150

Other assets and liabilities measured/designated at FVTPL

    1,833       1,727       879         3,560       (171

Current income taxes

    154       62       (26       216       1,216  

Cash collateral on securities lent

    1,460       (79     (50       1,381       (250

Obligations related to securities sold under repurchase agreements

    (10,402     4,869       22,637         (5,533     27,976  

Cash collateral on securities borrowed

    (16     (3,010     896         (3,026     (2,068

Securities purchased under resale agreements

    1,290       1,199       (8,414       2,489       (9,221

Other, net (2)

    (35     (3,983     (21       (4,018     (215
      (17,760     (1,110     44,161         (18,870     44,939  

Cash flows provided by (used in) financing activities

               

Issue of subordinated indebtedness

    1,000                     1,000        

Redemption/repurchase/maturity of subordinated indebtedness

          (1,008             (1,008      

Issue of common shares for cash

    85       62       35         147       118  

Purchase of common shares for cancellation

                (69             (234

Net sale (purchase) of treasury shares

    3       (16     (3       (13     (2

Dividends and distributions paid

    (673     (651     (643       (1,324     (1,279

Repayment of lease liabilities

    (74     (74     (77       (148     (152
      341       (1,687     (757       (1,346     (1,549

Cash flows provided by (used in) investing activities

               

Purchase of securities measured/designated at FVOCI and amortized cost

    (12,052     (9,954     (17,997       (22,006     (27,818

Proceeds from sale of securities measured/designated at FVOCI and amortized cost

    7,379       6,812       1,621         14,191       5,378  

Proceeds from maturity of debt securities measured at FVOCI and amortized cost

    6,301       5,676       6,028         11,977       13,173  

Net sale (purchase) of property, equipment, software and other intangibles (2)

    (175     (184     (171       (359     (336
      1,453       2,350       (10,519       3,803       (9,603

Effect of exchange rate changes on cash and non-interest-bearing deposits with banks

    (96     (98     129         (194     141  

Net increase (decrease) in cash and non-interest-bearing deposits with banks during the period

    (16,062     (545     33,014         (16,607     33,928  

Cash and non-interest-bearing deposits with banks at beginning of period

    42,986       43,531       4,754         43,531       3,840  

Cash and non-interest-bearing deposits with banks at end of period (3)

  $     26,924     $     42,986     $     37,768       $     26,924     $     37,768  

Cash interest paid

  $ 951     $ 1,091     $ 1,937       $ 2,042     $ 4,470  

Cash interest received

    3,323       3,659       4,384         6,982       9,523  

Cash dividends received

    257       244       220         501       414  

Cash income taxes paid (received)

    368       360       163         728       (669
(1)

Comprises amortization and impairment of buildings, right-of-use assets, furniture, equipment, leasehold improvements, and software and other intangible assets.

(2)

Restated from amounts previously presented.

(3)

Includes restricted cash of $492 million (January 31, 2021: $493 million; April 30, 2020: $698 million) and interest-bearing demand deposits with Bank of Canada.

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these interim consolidated financial statements.

 

CIBC SECOND QUARTER 2021     45  


Table of Contents

Notes to the interim consolidated financial statements

(Unaudited)

The interim consolidated financial statements of CIBC are prepared in accordance with Section 308(4) of the Bank Act (Canada), which states that, except as otherwise specified by the Office of the Superintendent of Financial Institutions (OSFI), the financial statements are to be prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). There are no accounting requirements of OSFI that are exceptions to IFRS.

These interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” and do not include all of the information required for full annual consolidated financial statements. Except as indicated below, these interim consolidated financial statements follow the same accounting policies and methods of application as CIBC’s consolidated financial statements as at and for the year ended October 31, 2020.

All amounts in these interim consolidated financial statements are presented in Canadian dollars, unless otherwise indicated. These interim consolidated financial statements were authorized for issue by the Board of Directors on May 26, 2021.

Note 1.    Changes in accounting policies

(a)    Current period changes in accounting policies

Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

Various interest rate and other indices that are deemed to be “benchmarks” (including LIBOR) are the subject of international regulatory guidance and proposals for reform. Regulators in various jurisdictions have pushed for the transition from Interbank Offered Rates (IBORs) to alternative benchmark rates (alternative rates), based upon risk-free rates determined using actual market transactions. The U.K.’s Financial Conduct Authority (FCA) originally announced in July 2017 that it would not compel banks to submit LIBOR rates after December 2021. In March 2021, the FCA and the ICE Benchmark Administrator (IBA) announced the dates for the cessation or loss of representativeness of various LIBOR rates including that GBP, EUR, CHF and JPY LIBORs will cease on December 31, 2021 and that most USD LIBOR tenors will cease on June 30, 2023. This announcement results in a fixed spread between the LIBOR rate and the alternative rate for a given tenor which will apply on the cessation of the relevant LIBOR rates. The extension for most USD LIBOR tenors until June 30, 2023 would allow many legacy contracts to mature before the cessation date, however, originations of new USD LIBOR-linked products would cease after the end of 2021.

In response to interest rate benchmark reform, the IASB issued “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16” (Phase 2 amendments) in August 2020. These amendments address issues that affect financial reporting once an existing rate is replaced with an alternative rate and concludes the IASB’s amendments to financial reporting standards due to the effects of interest rate benchmark reform. While the Phase 2 amendments are effective for annual periods beginning on or after January 1, 2021, we elected to early adopt the Phase 2 amendments effective November 1, 2020. Only the amendments to IAS 39 “Financial Instruments: Recognition and Measurement” (IAS 39), IFRS 7 “Financial Instruments: Disclosures”, IFRS 4 “Insurance Contracts”, and IFRS 16 “Leases” apply to us because we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9 “Financial Instruments” (IFRS 9).

The Phase 2 amendments permit modifications of amortized cost financial assets and financial liabilities, and lessee lease liabilities that are made as a direct consequence of IBOR reform, and on an economically equivalent basis to be accounted for by updating the effective interest rate prospectively with no immediate gain or loss recognition. The amendments also provide temporary relief that allows for hedging relationships to continue upon the replacement of an existing interest rate benchmark with an alternative rate under certain qualifying conditions, including the amendment of the hedge designation and documentation to reflect the new rate, and permits new hedging relationships that are in the scope of the Phase 2 amendments.

The IASB had previously issued “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7” (Phase 1 amendments) in September 2019. The Phase 1 amendments provide relief for specific hedge accounting requirements to address uncertainties in the period before the interest rate benchmark reform, and provide specific disclosure requirements for the affected hedging relationships. We adopted the Phase 1 amendments effective November 1, 2019 and the disclosure can be found in Note 1 to the consolidated financial statements included in our 2020 Annual Report.

As IBORs are widely referenced by large volumes of derivative, loan and cash products, the transition presents a number of risks to us, and the industry as a whole. These transition risks include market risk (in the eventuality that new basis risks emerge), model risk, operational risk (as processes are changed or newly introduced), legal risk (as contracts are revised) and conduct risk (in ensuring clients are adequately informed/prepared). In response to the proposed reforms to interest rate benchmarks, we have established an Enterprise IBOR Transition Program (Program), which is supported by a formal governance structure and dedicated working groups that include stakeholders from frontline businesses as well as functional groups such as Treasury, Technology and Operations, Risk Management, Legal and Finance, to manage and coordinate all aspects of the transition, including the identification and mitigation of the risks. An IBOR Steering Committee has been established with responsibility for oversight and execution of the Program. The IBOR Steering Committee manages the impact of the transition risks through appropriate mitigating actions. We also continue to engage with industry associations to incorporate recent developments into our project plan. The Program provides regular updates to the senior management including the Executive Committee, and the Board of Directors.

As a part of the Program, we have begun to transition existing IBOR based contracts to those that reference the new alternative rates, and are developing business processes to support the transition. We have started to remediate our non-USD LIBOR referenced contracts by incorporating appropriate fallback language, and have ceased the issuance of certain new GBP LIBOR products that mature after the end of 2021 based upon the guidelines provided by the regulators. We have adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol to facilitate the transition of the contractual rate for derivatives with counterparties who have also adhered to the ISDA Protocol. Such transition will be effective on the occurrence of certain prescribed trigger events. We have continued to develop contract remediation plans for our LIBOR referencing products and have continued to make information available to clients, advising them on developments.

 

46   CIBC SECOND QUARTER 2021


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The following table presents the approximate notional amounts of our derivatives and the gross outstanding balances of our non-derivative financial assets and financial liabilities that are indexed to USD LIBOR, GBP LIBOR and other benchmark rates as at November 1, 2020 with a maturity date beyond December 31, 2021, that are expected to be affected by IBOR reform.

 

     Notional/gross outstanding amounts (1)(2)(3)  
$ billions, as at November 1, 2020            USD LIBOR      GBP LIBOR      Others (4)  
      Maturing after
December 31, 2021 and
before June 30, 2023
     Maturing after
June 30, 2023
 (5)
     Maturing after
December 31, 2021
 

Non-derivative financial assets

           

Securities

   $ 4.0      $ 1.9      $      $  

Loans

     18.6        21.2        2.4         
       22.6        23.1        2.4         

Non-derivative financial liabilities

           

Secured borrowing deposits and subordinated indebtedness

            0.1        1.1         

Other deposits

     0.8        1.0                
       0.8        1.1        1.1         

Derivatives

         276.4            463.3            70.4            33.3  
(1)

Excludes financial instruments which reference rates in multi-rate jurisdictions, including Canadian Dollar Offered Rate (CDOR), Euro Interbank Offered Rate (EURIBOR) and Australian Bank Bill Swap Rate. While the 6-month and 12-month tenors of CDOR discontinued on May 17, 2021, we did not hold material positions referencing these tenors as at November 1, 2020. Other tenors of CDOR are expected to continue.

(2)

The table excludes undrawn loan commitments. As at November 1, 2020, the total outstanding undrawn loan commitments that are potentially subject to the transition with a maturity date beyond December 31, 2021 are estimated to be $53.1 billion, including $52.1 billion which can be drawn in USD LIBOR and $1.0 billion which can be drawn in GBP LIBOR.

(3)

For cross currency swaps for which both legs reference benchmark rates that are subject to transition, the relevant notional amount for each leg has been included in the table above.

(4)

Includes exposures indexed to JPY LIBOR, CHF LIBOR and EUR LIBOR.

(5)

As at April 30, 2021, our USD LIBOR exposure excluding undrawn commitments, with a maturity date beyond June 30, 2023 was approximately $614.9 billion. In addition, undrawn loan commitments which can potentially be drawn in USD LIBOR with a maturity date beyond June 30, 2023 were approximately $31.1 billion.

Conceptual Framework for Financial Reporting (Conceptual Framework)

The Conceptual Framework sets out the fundamental concepts that underlie the preparation and presentation of financial statements and serves to guide the IASB in developing IFRS standards. The Conceptual Framework is effective for annual periods beginning on or after January 1, 2020. As a result, CIBC adopted the Conceptual Framework as at November 1, 2020.

There was no impact to our consolidated financial statements and no changes in our accounting policies as a result of adopting the Conceptual Framework.

(b)    Future accounting policy changes

For details on future accounting policy changes, refer to Note 32 to the consolidated financial statements included in our 2020 Annual Report. We are continuing to evaluate the impact of standards that are effective for us after fiscal 2021.

Note 2.    Impact of COVID-19

Although global economic activity has accelerated this year, the COVID-19 pandemic continues to have a significant adverse impact on the extent of that rebound. Continuing uncertainty related to economic growth and unemployment in Canada, the U.S. and other regions where we operate will ultimately only be resolved when the rollout of vaccination programs is near completion and is proven to be effective against new variants. As a result, we continue to operate in an uncertain macroeconomic environment.

Impact on estimates and assumptions

As disclosed in our 2020 Annual Report, the preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the recognized and measured amounts of assets, liabilities, net income, comprehensive income and related disclosures. Significant estimates and assumptions are made in the areas of the valuation of financial instruments, allowance for credit losses, the evaluation of whether to consolidate structured entities, asset impairment, income taxes, provisions and contingent liabilities, post-employment and other long-term benefit plan assumptions and valuation of self-managed loyalty points programs.

Further, the COVID-19 pandemic continues to give rise to heightened uncertainty as it relates to accounting estimates and assumptions and increases the need to apply judgment in evaluating the economic and market environment and its impact on significant estimates. This particularly impacts estimates and assumptions relating to the allowance for credit losses.

During the six months ended April 30, 2021, improvements in our economic outlook resulted in a relatively moderate reduction in our stage 1 and stage 2 performing expected credit losses (ECLs). Significant judgment was inherent in the forecasting of forward-looking information, including with regard to our base case assumption that the vaccinations programs will continue on a mass scale in many countries over the spring and summer and that the vaccinations will be able to effectively respond to the emerging variants, allowing for stronger global recovery in the latter half of the year.

Changes in the judgments and estimates related to IFRS 9 can have a significant impact on the level of ECL allowance recognized and the period-over-period volatility of the provision for credit losses. Actual results could differ from these estimates and assumptions. See Note 6 to our consolidated financial statements in our 2020 Annual Report, and Note 6 to our interim consolidated financial statements for more information concerning the high level of judgment inherent in the estimation of ECL allowance, including the impact of COVID-19.

 

CIBC SECOND QUARTER 2021     47  


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Note 3.    Fair value measurement

Fair value of financial instruments

 

         Carrying value              
$ millions, as at   Amortized
cost
    Mandatorily
measured
at FVTPL
    Designated
at FVTPL
    Fair value
through
OCI
    Total    

Fair

value

    Fair value
over (under)
carrying value
 

2021

   Financial assets              

Apr. 30

  

Cash and deposits with banks

  $ 46,543     $ 654     $     $     $ 47,197     $ 47,197     $  
  

Securities

    32,848       72,772       73       49,429       155,122       155,577       455  
  

Cash collateral on securities borrowed

    11,573                         11,573       11,573        
  

Securities purchased under resale agreements

    56,934       6,172                   63,106       63,106        
  

Loans

             
  

Residential mortgages

    234,368       29                   234,397       235,236       839  
  

Personal

    41,631                         41,631       41,663       32  
  

Credit card

    10,048                         10,048       10,048        
  

Business and government

    111,535       23,116       391             135,042       135,157       115  
  

Derivative instruments

          35,313                   35,313       35,313        
  

Customers’ liability under acceptances

    11,002                         11,002       11,002        
    

Other assets

    19,006                         19,006       19,006        
  

Financial liabilities

             
  

Deposits

             
  

Personal

  $     200,688     $     $ 6,340     $     $     207,028     $     207,180     $ 152  
  

Business and government

    302,623                 10,578             313,201       314,165       964  
  

Bank

    17,140                         17,140       17,140        
  

Secured borrowings

    38,225             969             39,194       39,543       349  
  

Derivative instruments

              34,121                   34,121       34,121        
  

Acceptances

    11,071                         11,071       11,071        
  

Obligations related to securities sold short

          20,269                   20,269       20,269        
  

Cash collateral on securities lent

    3,205                         3,205       3,205        
  

Obligations related to securities sold under repurchase agreements (1)

    64,195             1,925             66,120       66,120        
  

Other liabilities

    16,395       119       26             16,540       16,540        
    

Subordinated indebtedness

    5,653                         5,653       5,952       299  

2020

  

Financial assets

             

Oct. 31

  

Cash and deposits with banks

  $ 61,570     $ 948     $     $     $ 62,518     $ 62,518     $  
  

Securities

    31,800       62,576       117           54,553       149,046       149,599       553  
  

Cash collateral on securities borrowed

    8,547                         8,547       8,547        
  

Securities purchased under resale agreements

    58,090       7,505                   65,595       65,595        
  

Loans

             
  

Residential mortgages

    220,739       63                   220,802       222,920           2,118  
  

Personal

    41,390                         41,390       41,452       62  
  

Credit card

    10,722                         10,722       10,722        
  

Business and government

    110,220       23,291       357             133,868       134,097       229  
  

Derivative instruments

          32,730                   32,730       32,730        
  

Customers’ liability under acceptances

    9,606                         9,606       9,606        
    

Other assets

    15,940                         15,940       15,940        
  

Financial liabilities

             
  

Deposits

             
  

Personal

  $ 199,593     $     $ 2,559     $     $ 202,152     $ 202,345     $ 193  
  

Business and government

    301,546             9,880             311,426       312,279       853  
  

Bank

    17,011                         17,011       17,011        
  

Secured borrowings

    39,560             591             40,151       40,586       435  
  

Derivative instruments

          30,508                   30,508       30,508        
  

Acceptances

    9,649                         9,649       9,649        
  

Obligations related to securities sold short

          15,963                   15,963       15,963        
  

Cash collateral on securities lent

    1,824                         1,824       1,824        
  

Obligations related to securities sold under repurchase agreements (1)

    54,617             17,036             71,653       71,653        
  

Other liabilities

    15,282       133       9             15,424       15,424        
    

Subordinated indebtedness

    5,712                         5,712       5,993       281  
(1)

Includes obligations related to securities sold under repurchase agreements supported by bearer deposit notes that are pledged as collateral under the Bank of Canada Term Repo Facility.

 

48   CIBC SECOND QUARTER 2021


Table of Contents

The table below presents the level in the fair value hierarchy into which the fair values of financial instruments, that are carried at fair value on the interim consolidated balance sheet, are categorized:

 

    Level 1           Level 2           Level 3        
     Quoted market price            Valuation technique –
observable market inputs
           Valuation technique –
non-observable market inputs
    Total      Total  
$ millions, as at   2021
Apr. 30
    2020
Oct. 31
           2021
Apr. 30
   

2020

Oct. 31

           2021
Apr. 30
    2020
Oct. 31
    2021
Apr. 30
     2020
Oct. 31
 

Financial assets

                    

Deposits with banks

  $     $             $ 654     $ 948             $     $     $ 654      $ 948  

Securities mandatorily measured and designated
at FVTPL

 

                  

Government issued or guaranteed

    5,950       3,917         23,750  (1)      25,091  (1)                    29,700        29,008  

Corporate equity

    36,508       27,919         48       47         7       16       36,563        27,982  

Corporate debt

                  4,288       3,525               25       4,288        3,550  

Mortgage- and asset-backed

                        2,150  (2)      2,018  (2)              144       135       2,294        2,153  
      42,458       31,836               30,236       30,681               151       176       72,845        62,693  

Loans mandatorily measured and designated at FVTPL

                    

Business and government

                  22,511       23,022         996  (3)      626  (3)      23,507        23,648  

Residential mortgages

                        29       63                           29        63  
                          22,540       23,085               996       626       23,536        23,711  

Debt securities measured at FVOCI

                    

Government issued or guaranteed

    2,765       3,912         36,785       41,269                     39,550        45,181  

Corporate debt

                  6,917       6,224                     6,917        6,224  

Mortgage- and asset-backed

                        2,277       2,563                           2,277        2,563  
      2,765       3,912               45,979       50,056                           48,744        53,968  

Equity securities designated at FVOCI

                    

Corporate equity

    93       41               304       304               288       240       685        585  

Securities purchased under resale agreements

                    

measured at FVTPL

                        6,172       7,505                           6,172        7,505  

Derivative instruments

                    

Interest rate

          4         9,781       12,793         38       48       9,819        12,845  

Foreign exchange

                  14,248       11,462         8             14,256        11,462  

Credit

                  3       8         57       98       60        106  

Equity

    5,352       3,153         2,197       1,791         66       212       7,615        5,156  

Precious metal

                  245       283                     245        283  

Other commodity

    362       271               2,956       2,607                           3,318        2,878  
      5,714       3,428               29,430       28,944               169       358       35,313        32,730  

Total financial assets

  $ 51,030     $ 39,217             $ 135,315     $ 141,523             $      1,604     $     1,400     $     187,949      $     182,140  

Financial liabilities

                    

Deposits and other liabilities (4)

  $     $       $ (17,431   $ (13,176     $ (601   $ 4     $ (18,032    $ (13,172

Obligations related to securities sold short

    (9,092     (5,363       (11,177     (10,600                   (20,269      (15,963

Obligations related to securities sold under

                    

repurchase agreements

                        (1,925     (17,036                         (1,925      (17,036

Derivative instruments

                    

Interest rate

                  (8,032     (9,964       (218     (28     (8,250      (9,992

Foreign exchange

                  (13,890     (10,883                   (13,890      (10,883

Credit

                  (42     (41       (62     (107     (104      (148

Equity

    (4,177     (3,537       (5,952     (3,288       (184     (163     (10,313      (6,988

Precious metal

                  (249     (366                   (249      (366

Other commodity

    (395     (325             (920     (1,806                         (1,315      (2,131
      (4,572     (3,862             (29,085     (26,348             (464     (298     (34,121      (30,508

Total financial liabilities

  $     (13,664   $     (9,225           $     (59,618   $     (67,160           $ (1,065   $ (294   $ (74,347    $ (76,679
(1)

Includes $50 million related to securities designated at FVTPL (October 31, 2020: $57 million).

(2)

Includes $23 million related to asset-backed securities designated at FVTPL (October 31, 2020: $60 million).

(3)

Includes $391 million related to loans designated at FVTPL (October 31, 2020: $357 million).

(4)

Comprises deposits designated at FVTPL of $17,109 million (October 31, 2020: $13,419 million), net bifurcated embedded derivative liabilities of $778 million (net bifurcated embedded derivative assets of $389 million as at October 31, 2020), other liabilities designated at FVTPL of $26 million (October 31, 2020: $9 million), and other financial liabilities measured at fair value of $119 million (October 31, 2020: $133 million).

Transfers between levels in the fair value hierarchy are deemed to have occurred at the beginning of the quarter in which the transfer occurred. Transfers between levels can occur as a result of additional or new information regarding valuation inputs and changes in their observability. During the quarter ended April 30, 2021, we transferred $76 million of securities mandatorily measured at FVTPL from Level 1 to Level 2 and $21 million from Level 2 to Level 1, and $578 million of securities sold short from Level 1 to Level 2 and $69 million from Level 2 to Level 1, due to changes in observability in the inputs used to value these securities (for the quarter ended January 31, 2021, $19 million of securities mandatorily measured at FVTPL and $128 million of securities sold short were transferred from Level 1 to Level 2 and nil from Level 2 to Level 1; for the quarter ended April 30, 2020, $2,017 million of securities mandatorily measured at FVTPL and $1,248 million of securities sold short were transferred from Level 1 to Level 2 and nil from Level 2 to Level 1). In addition, transfers between Level 2 and Level 3 were made during the quarters ended April 30, 2021, January 31, 2021 and April 30, 2020, primarily due to changes in the assessment of the observability of certain correlation, market volatility and probability inputs that were used in measuring the fair value of our fair value option liabilities and derivatives.

The following table presents the changes in fair value of financial assets and liabilities in Level 3. These instruments are measured at fair value utilizing non-observable market inputs. We often hedge positions with offsetting positions that may be classified in a different level. As a result, the gains and losses for assets and liabilities in the Level 3 category presented in the table below do not reflect the effect of offsetting gains and losses on the related hedging instruments that are classified in Level 1 and Level 2.

 

CIBC SECOND QUARTER 2021     49  


Table of Contents
         

Net gains (losses)

    included in income (1)    

                                     
$ millions, for the three months ended   Opening
balance
    Realized (2)     Unrealized (2)(3)     Net unrealized
gains (losses)
included in OCI (4)
    Transfer
in to
Level 3
    Transfer
out of
Level 3
    Purchases/
Issuances
    Sales/
Settlements
    Closing
balance
 

Apr. 30, 2021

                 

Securities mandatorily measured and designated at FVTPL

                 

Corporate equity

  $ 19     $     $ (6   $     $     $     $ 23     $ (29   $ 7  

Corporate debt

    30             8                               (38      

Mortgage- and asset-backed

    102                                     44       (2     144  

Loans mandatorily measured and designated at FVTPL

                 

Business and government

    879             (1     (33                 180       (29     996  

Debt securities measured at FVOCI

                 

Corporate debt

                                                     

Equity securities designated at FVOCI

                 

Corporate equity

    269                   17                   10       (8     288  

Derivative instruments

                 

Interest rate

    45             (8                       1             38  

Foreign exchange

                16             (8                       8  

Credit

    101       (6     (38                                   57  

Equity

    61                               (1     6             66  

Total assets

  $ 1,506     $ (6   $ (29   $ (16   $ (8   $ (1   $ 264     $ (106   $ 1,604  

Deposits and other liabilities (5)

  $ (367   $ 6     $ (257   $     $ (13   $ (3   $ (38   $ 71     $ (601

Derivative instruments

                 

Interest rate

    (74           (90           (28           (29     3       (218

Credit

    (113     6       44                               1       (62

Equity

    (137           (62                 8       (15     22       (184

Total liabilities

  $ (691   $ 12     $ (365   $     $ (41   $ 5     $ (82   $ 97     $ (1,065

Jan. 31, 2021

                 

Securities mandatorily measured and designated
at FVTPL

                 

Corporate equity

  $ 16     $     $ 3     $     $     $     $     $     $ 19  

Corporate debt

    25             5                                     30  

Mortgage- and asset-backed

    135                                           (33     102  

Loans mandatorily measured and designated at FVTPL

                 

Business and government

    626                   (25                 278             879  

Equity securities designated at FVOCI

                 

Corporate equity

    240                   19                   17       (7     269  

Derivative instruments

                 

Interest rate

    48             (4                             1       45  

Credit

    98       (6     9                                     101  

Equity

    212             15                               (166     61  

Total assets

  $ 1,400     $ (6   $ 28     $ (6)     $     $     $ 295     $ (205   $ 1,506  

Deposits and other liabilities (5)

  $ 4     $     $ (387   $     $ (2   $ (5   $ (2   $ 25     $ (367

Derivative instruments

                 

Interest rate

    (28           (47                             1       (74

Credit

    (107     6       (8                             (4     (113

Equity

    (163           (44                             70       (137

Total liabilities

  $ (294   $ 6     $ (486   $     $ (2   $ (5)     $ (2   $ 92     $ (691

Apr. 30, 2020

                 

Securities mandatorily measured and designated
at FVTPL

                 

Corporate equity

  $ 14     $     $ (7   $     $     $     $     $     $ 7  

Corporate debt

    23             2                                     25  

Mortgage- and asset-backed

    160                                     118             278  

Loans mandatorily measured at FVTPL

                 

Business and government

    506                   17                   574       (179     918  

Debt securities measured at FVOCI

                 

Corporate debt

    23                   (6                 1             18  

Equity securities designated at FVOCI

                 

Corporate equity

    283                   (44                 10       (6     243  

Derivative instruments

                 

Interest rate

    47             21                               8       76  

Credit

    104       (4     5                                     105  

Equity

    266             (36                       1       (10     221  

Total assets

  $     1,426     $     (4   $ (15   $ (33)     $        –     $     $ 704     $     (187   $     1,891  

Deposits and other liabilities (5)

  $ (647   $     $ 679     $     $ (6)     $     29     $ 53     $ 49     $ 157  

Derivative instruments

                 

Interest rate

                                                     

Credit

    (112     4       (5                                   (113

Equity

    (121               34                         (29     5       (111

Total liabilities

  $ (880   $ 4     $     708     $         –     $ (6   $ 29     $      24     $ 54     $ (67
(1)

Cumulative AOCI gains or losses related to equity securities designated at FVOCI are reclassified from AOCI to retained earnings at the time of disposal or derecognition.

(2)

Includes foreign currency gains and losses related to debt securities measured at FVOCI.

(3)

Comprises unrealized gains and losses relating to the assets and liabilities held at the end of the reporting period.

(4)

Foreign exchange translation on loans mandatorily measured at FVTPL held by foreign operations and denominated in the same currency as the foreign operations is included in OCI.

(5)

Includes deposits designated at FVTPL of $13 million (January 31, 2021: $136 million; April 30, 2020: $146 million), net bifurcated embedded derivative liabilities of $562 million (net bifurcated embedded derivative liabilities of $231 million as at January 31, 2021 and net bifurcated embedded derivative assets of $303 million as at April 30, 2020) and other liabilities designated at FVTPL of $26 million (January 31, 2021: nil; April 30, 2020: nil).

 

50   CIBC SECOND QUARTER 2021


Table of Contents
         

Net gains (losses)
included in income (1)

                                     
$ millions, for the six months ended   Opening
balance
    Realized (2)     Unrealized (2)(3)     Net unrealized
gains (losses)
included in OCI (4)
    Transfer
in to
Level 3
    Transfer
out of
Level 3
    Purchases/
Issuances
    Sales/
Settlements
    Closing
balance
 

Apr. 30, 2021

                 

Securities mandatorily measured and designated
at FVTPL

                 

Corporate equity

  $ 16     $     $ (3   $     $     $     $ 23     $ (29   $ 7  

Corporate debt

    25             13                               (38      

Mortgage- and asset-backed

    135                                     44       (35     144  

Loans mandatorily measured and designated at FVTPL

                 

Business and government

    626             (1     (58                 458       (29     996  

Debt securities measured at FVOCI

                 

Corporate debt

                                                     

Equity securities designated at FVOCI

                 

Corporate equity

    240                   36                   27       (15     288  

Derivative instruments

                 

Interest rate

    48             (12                       1       1       38  

Foreign exchange

                16             (8                       8  

Credit

    98       (12     (29                                   57  

Equity

    212             15                   (1     6       (166     66  

Total assets

  $     1,400     $ (12   $ (1   $ (22   $ (8   $ (1   $ 559     $ (311   $    1,604  

Deposits and other liabilities (5)

  $ 4     $ 6     $ (644   $     $ (15   $ (8   $ (40   $ 96     $ (601

Derivative instruments

                 

Interest rate

    (28           (137           (28           (29     4       (218

Foreign exchange

                                                     

Credit

    (107     12       36                               (3     (62

Equity

    (163           (106                 8       (15     92       (184

Total liabilities

  $ (294   $ 18     $ (851   $     $ (43   $     $ (84   $ 189     $ (1,065

Apr. 30, 2020

                 

Securities mandatorily measured and designated
at FVTPL

                 

Corporate equity

  $ 7     $     $ (7   $     $ 7     $     $     $     $ 7  

Corporate debt

    23             2                                     25  

Mortgage- and asset-backed

    173                                     118       (13     278  

Loans mandatorily measured at FVTPL

                 

Business and government

    831                   21                   574       (508     918  

Debt securities measured at FVOCI

                 

Corporate debt

                      (3     20             1             18  

Equity securities designated at FVOCI

                 

Corporate equity

    291                   5                   20       (73     243  

Derivative instruments

                 

Interest rate

    56             24                         1       (5     76  

Credit

    104       (5     6                                     105  

Equity

    252             (24                       45       (52     221  

Total assets

  $ 1,737     $ (5)     $ 1     $     23     $     27     $     $     759     $ (651)     $ 1,891  

Deposits and other liabilities (5)

  $ (601   $     $ 627     $     $ (43)     $     60     $ (49   $     163     $ 157  

Derivative instruments

                 

Interest rate

    (1           (2                             3        

Credit

    (112     5       (6                                   (113

Equity

    (155           55                         (39     28       (111

Total liabilities

  $ (869   $       5     $       674     $     $ (43   $ 60     $ (88   $ 194     $ (67
(1)

Cumulative AOCI gains or losses related to equity securities designated at FVOCI are reclassified from AOCI to retained earnings at the time of disposal or derecognition.

(2)

Includes foreign currency gains and losses related to debt securities measured at FVOCI.

(3)

Comprises unrealized gains and losses relating to these assets and liabilities held at the end of the reporting period.

(4)

Foreign exchange translation on loans mandatorily measured at FVTPL held by foreign operations and denominated in the same currency as the foreign operations is included in OCI.

(5)

Includes deposits designated at FVTPL of $13 million (April 30, 2020: $146 million), net bifurcated embedded derivative liabilities of $562 million (April 30, 2020: net bifurcated embedded derivative assets of $303 million) and other liabilities designated at FVTPL of $26 million (April 30, 2020: nil).

Financial instruments designated at FVTPL (fair value option)

A net gain of $14 million, net of hedges for the three months ended April 30, 2021 (a net gain of $19 million and a net gain of $36 million for the three months ended January 31, 2021 and April 30, 2020, respectively), which is included in the interim consolidated statement of income under Gains (losses) from financial instruments measured/designated at FVTPL, net was recognized for FVO assets and FVO liabilities. A net gain of $33 million, net of hedges for the six months ended April 30, 2021 was recognized for FVO assets and FVO liabilities (a net gain of $42 million for the six months ended April 30, 2020).

The fair value of a FVO liability reflects the credit risk relating to that liability. For those FVO liabilities for which we believe changes in our credit risk would impact the fair value from the note holders’ perspective, the related fair value changes were recognized in OCI.

 

CIBC SECOND QUARTER 2021     51  


Table of Contents

Note 4.    Significant transactions

Sale of FirstCaribbean International Bank Limited

On November 8, 2019, we announced that we had entered into a definitive agreement to sell 66.73% of the outstanding shares of FirstCaribbean International Bank Limited (CIBC FirstCaribbean) to GNB Financial Group Limited (GNB), subject to regulatory approvals, as discussed in Note 4 to the consolidated financial statements included in our 2020 Annual Report.

As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our revised expectations concerning the likelihood and timing of a potential transaction, we discontinued the application of held for sale accounting of CIBC FirstCaribbean in the fourth quarter of 2020 and recorded a goodwill impairment charge of $220 million. On February 3, 2021, we announced that the proposed sale of CIBC FirstCaribbean to GNB did not receive approval from CIBC FirstCaribbean’s regulators and that the transaction will not proceed.

Note 5.    Securities

Securities

 

$ millions, as at    2021
Apr. 30
     2020
Oct. 31
 
      Carrying amount  

Debt securities measured at FVOCI

   $ 48,744      $ 53,968  

Equity securities designated at FVOCI

     685        585  

Securities measured at amortized cost (1)

     32,848        31,800  

Securities mandatorily measured and designated at FVTPL

     72,845        62,693  
     $     155,122      $     149,046  
(1)

There were no sales of securities measured at amortized cost during the quarter (October 31, 2020: nil).

Fair value of debt securities measured and equity securities designated at FVOCI

 

$ millions, as at                           2021
Apr. 30
                            2020
Oct. 31
 
      Amortized
cost 
(1)
     Gross
unrealized
gains
     Gross
unrealized
losses
   

Fair

value

     Amortized
cost (1)
     Gross
unrealized
gains
     Gross
unrealized
losses
   

Fair

value

 

Securities issued or guaranteed by:

                     

Canadian federal government

   $ 9,498      $ 38      $ (1   $ 9,535      $ 11,379      $ 32      $ (2   $ 11,409  

Other Canadian governments

     12,998        143        (1     13,140        15,187        128              15,315  

U.S. Treasury and agencies

     10,884        40        (1     10,923        12,533        63              12,596  

Other foreign governments

     5,922        33        (3     5,952        5,825        38        (2     5,861  

Mortgage-backed securities

     1,845        38              1,883        2,320        49        (1     2,368  

Asset-backed securities

     395               (1     394        197               (2     195  

Corporate debt

     6,898        21        (2     6,917        6,194        31        (1     6,224  
       48,440        313        (9     48,744        53,635        341        (8     53,968  

Corporate public equity (2)

     67        28              95        30        15        (3     42  

Corporate private equity

     556        68        (34     590        546        43        (46     543  
       623        96        (34     685        576        58        (49     585  
     $     49,063      $     409      $     (43   $     49,429      $     54,211      $     399        $    (57   $     54,553  
(1)

Net of allowance for credit losses for debt securities measured at FVOCI of $18 million (October 31, 2020: $22 million).

(2)

Includes restricted stock.

The fair value of equity securities designated at FVOCI that were disposed of during the three months ended April 30, 2021 was nil ($7 million and nil for the three months ended January 31, 2021 and April 30, 2020, respectively) and $7 million for the six months ended April 30, 2021 (April 30, 2020: nil).

Net realized cumulative after-tax gains resulting from dispositions of equity securities designated at FVOCI and return on capital distributions from limited partnerships designated at FVOCI of $1 million were reclassified from AOCI to retained earnings for the three months ended April 30, 2021 ($3 million and $2 million for the three months ended January 31, 2021 and April 30, 2020, respectively) and $4 million for the six months ended April 30, 2021 (April 30, 2020: $31 million).

Dividend income recognized on equity securities designated at FVOCI that were still held as at April 30, 2021 was $1 million ($1 million and $1 million for the three months ended January 31, 2021 and April 30, 2020, respectively) and $2 million for the six months ended April 30, 2021 (April 30, 2020: $5 million). Dividend income recognized on equity securities designated at FVOCI that were disposed of as at April 30, 2021 was nil (nil and nil for the three months ended January 31, 2021 and April 30, 2020, respectively) and nil for the six months ended April 30, 2021 (April 30, 2020: nil).

 

52   CIBC SECOND QUARTER 2021


Table of Contents

Allowance for credit losses

The following table provides a reconciliation of the opening balance to the closing balance of the ECL allowance for debt securities measured at FVOCI:

 

         Stage 1     Stage 2     Stage 3             
$ millions, as at or for the three months ended    Collective provision
12-month ECL
performing
    Collective provision
lifetime ECL
performing
    Collective and
individual provision
lifetime ECL
credit-impaired
          Total  

2021

 

Debt securities measured at FVOCI

           

Apr. 30

 

Balance at beginning of period

   $     17     $ 3     $        $ 20  
 

Provision for (reversal of) credit losses (1)

     (2     1                (1
 

Write-offs

                           
   

Foreign exchange and other

     (1                      (1
   

Balance at end of period

   $ 14     $ 4     $          $ 18  

2021

 

Debt securities measured at FVOCI

           

Jan. 31

 

Balance at beginning of period

   $ 18     $ 4     $        $ 22  
 

Provision for (reversal of) credit losses (1)

     (1     (1              (2
 

Write-offs

                           
   

Foreign exchange and other

                             
   

Balance at end of period

   $ 17     $ 3     $          $ 20  

2020

 

Debt securities measured at FVOCI

           

Apr. 30

 

Balance at beginning of period

   $ 14     $ 2     $ 6        $ 22  
 

Provision for (reversal of) credit losses (1)(2)

     5       4                9  
 

Write-offs

                           
   

Foreign exchange and other

                 1            1  
   

Balance at end of period

   $ 19     $     6     $     7          $     32  
(1)

Included in gains (losses) from debt securities measured at FVOCI and amortized cost, net on our interim consolidated statement of income.

(2)

Excludes stage 3 provisions for credit loss of $13 million for the three months ended April 30, 2020 for originated credit-impaired amortized cost securities that are recognized in the gains (losses) from debt securities measured at FVOCI and amortized cost, net on our interim consolidated statement of income.

 

          Stage 1     Stage 2     Stage 3             
$ millions, as at or for the six months ended    Collective provision
12-month ECL
performing
    Collective provision
lifetime ECL
performing
    Collective and
individual provision
lifetime ECL
credit-impaired
          Total  

2021

  

Debt securities measured at FVOCI

           

Apr. 30

  

Balance at beginning of period

   $     18     $ 4     $        $ 22  
  

Provision for (reversal of) credit losses (1)

     (3                    (3
  

Write-offs

                           
    

Foreign exchange and other

     (1                      (1
    

Balance at end of period

   $ 14     $ 4     $          $ 18  

2020

  

Debt securities measured at FVOCI

           

Apr. 30

  

Balance at beginning of period

   $ 14     $ 3     $ 6        $ 23  
  

Provision for (reversal of) credit losses (1)(2)

     4       4                8  
  

Write-offs

                           
    

Foreign exchange and other

     1       (1     1            1  
    

Balance at end of period

   $ 19     $     6     $     7          $     32  
(1)

Included in gains (losses) from debt securities measured at FVOCI and amortized cost, net on our interim consolidated statement of income.

(2)

Excludes stage 3 provisions for credit loss of $13 million for the six months ended April 30, 2020 for originated credit-impaired amortized cost securities that are recognized in the gains (losses) from debt securities measured at FVOCI and amortized cost, net on our interim consolidated statement of income.

 

CIBC SECOND QUARTER 2021     53  


Table of Contents

Note 6.    Loans

Allowance for credit losses

The following table provides a reconciliation of the opening balance to the closing balance of the ECL allowance:

 

$ millions, as at or for the three months ended    2021
Apr. 30
 
     Stage 1     Stage 2     Stage 3         
     

Collective
provision
12-month

ECL

performing

   

Collective
provision
lifetime

ECL

performing

    Collective and
individual
provision
lifetime ECL
credit-impaired
     Total  

Residential mortgages

         

Balance at beginning of period

   $ 52     $ 136     $ 148      $ 336  

Originations net of repayments and other derecognitions

     6       (2     (3      1  

Changes in model

                 16        16  

Net remeasurement (1)

     (25     13       28        16  

Transfers (1)

         

– to 12-month ECL

     31       (26     (5       

– to lifetime ECL performing

     (2     7       (5       

– to lifetime ECL credit-impaired

           (6     6         

Provision for (reversal of) credit losses (2)

     10       (14     37        33  

Write-offs

                 (6      (6

Recoveries

                 1        1  

Interest income on impaired loans

                 (5      (5

Foreign exchange and other

     (2     (3     (4      (9

Balance at end of period

   $ 60     $ 119     $ 171      $ 350  

Personal

         

Balance at beginning of period

   $ 181     $ 535     $ 118      $ 834  

Originations net of repayments and other derecognitions

     11       (14     (2      (5

Changes in model

     (4           (1      (5

Net remeasurement (1)

     (98     49       46        (3

Transfers (1)

         

– to 12-month ECL

     75       (73     (2       

– to lifetime ECL performing

     (8     13       (5       

– to lifetime ECL credit-impaired

           (15     15         

Provision for (reversal of) credit losses (2)

     (24     (40     51        (13

Write-offs

                 (70      (70

Recoveries

                 18        18  

Interest income on impaired loans

                 (1      (1

Foreign exchange and other

     (2           (1      (3

Balance at end of period

   $ 155     $ 495     $ 115      $ 765  

Credit card

         

Balance at beginning of period

   $ 116     $ 574     $      $ 690  

Originations net of repayments and other derecognitions

           (18            (18

Changes in model

                         

Net remeasurement (1)

     (45     104       26        85  

Transfers (1)

         

– to 12-month ECL

     98       (98             

– to lifetime ECL performing

     (6     6               

– to lifetime ECL credit-impaired

           (117     117         

Provision for (reversal of) credit losses (2)

     47       (123     143        67  

Write-offs

                 (174      (174

Recoveries

                 31        31  

Interest income on impaired loans

                         

Foreign exchange and other

                         

Balance at end of period

   $ 163     $ 451     $      $ 614  

Business and government

         

Balance at beginning of period

   $ 462     $ 623     $ 686      $ 1,771  

Originations net of repayments and other derecognitions

     5       (2     (3       

Changes in model

                         

Net remeasurement (1)

     (103     34       14        (55

Transfers (1)

         

– to 12-month ECL

     42       (36     (6       

– to lifetime ECL performing

     (22     27       (5       

– to lifetime ECL credit-impaired

     (2     (13     15         

Provision for (reversal of) credit losses (2)

     (80     10       15        (55

Write-offs

                 (66      (66

Recoveries

                 5        5  

Interest income on impaired loans

                 (5      (5

Foreign exchange and other

     (12     (14     (15      (41

Balance at end of period

   $ 370     $ 619     $ 620      $ 1,609  

Total ECL allowance (3)

   $ 748     $ 1,684     $ 906      $ 3,338  

Comprises:

         

Loans

   $        665     $        1,629     $        906      $        3,200  

Undrawn credit facilities and other off-balance sheet exposures (4)

     83       55              138  
(1)

Transfers represent stage movements of prior period ECL allowances to the current period stage classification. Net remeasurement represents the current period change in ECL allowances for transfers, net write-offs, changes in forecasts of forward-looking information, parameter updates, and partial repayments in the period.

(2)

Provision for (reversal of) credit losses for loans and undrawn credit facilities and other off-balance sheet exposures is presented as Provision for (reversal of) credit losses on our interim consolidated statement of income.

(3)

See Note 5 for the ECL allowance on debt securities measured at FVOCI. The table above excludes the ECL allowance on debt securities classified at amortized cost of $15 million as at April 30, 2021 (January 31, 2021: $16 million; April 30, 2020: $15 million), $13 million of which was a stage 3 ECL allowance on originated credit-impaired amortized cost debt securities (January 31, 2021: $13 million; April 30, 2020: $13 million). The ECL allowances for other financial assets classified at amortized cost were immaterial as at April 30, 2021 and were excluded from the table above. Financial assets other than loans that are classified at amortized cost are presented on our interim consolidated balance sheet net of ECL allowances.

(4)

Included in Other liabilities on our interim consolidated balance sheet.

(5)

Includes the ECL allowance for purchased credit-impaired loans from the acquisition of The PrivateBank.

 

54   CIBC SECOND QUARTER 2021


Table of Contents
$ millions, as at or for the three months ended   2021
Jan. 31
    2020
Apr. 30
 
    Stage 1     Stage 2     Stage 3           Stage 1     Stage 2     Stage 3        
     Collective
provision
12-month
ECL
performing
    Collective
provision
lifetime
ECL
performing
    Collective and
individual
provision
lifetime ECL
credit-impaired
    Total     Collective
provision
12-month
ECL
performing
    Collective
provision
lifetime
ECL
performing
    Collective and
individual
provision
lifetime ECL
credit-impaired (5)
    Total  

Residential mortgages

               

Balance at beginning of period

  $ 51     $ 161     $ 151     $ 363     $ 28     $ 40     $ 146     $ 214  

Originations net of repayments and other derecognitions

    4       (6     (4     (6     2       (2     (5     (5

Changes in model

                            (1     2             1  

Net remeasurement (1)

    (32     7       22       (3     23       35       25       83  

Transfers (1)

               

– to 12-month ECL

    33       (27     (6           8       (6     (2      

– to lifetime ECL performing

    (3     10       (7           (10     14       (4      

– to lifetime ECL credit-impaired

          (5     5                   (2     2        

Provision for (reversal of) credit losses (2)

    2       (21     10       (9     22       41       16       79  

Write-offs

                (6     (6                 (3     (3

Recoveries

                1       1                   1       1  

Interest income on impaired loans

                (4     (4                 (4     (4

Foreign exchange and other

    (1     (4     (4     (9           1       2       3  

Balance at end of period

  $ 52     $ 136     $ 148     $ 336     $ 50     $ 82     $ 158     $ 290  

Personal

               

Balance at beginning of period

  $ 204     $ 546     $ 113     $ 863     $ 182     $ 268     $ 121     $ 571  

Originations net of repayments and other derecognitions

    11       (15     (2     (6     8       (9     (4     (5

Changes in model

    1       1             2       (44     79             35  

Net remeasurement (1)

    (110     84       61       35       31       168       81       280  

Transfers (1)

               

– to 12-month ECL

    87       (84     (3           43       (42     (1      

– to lifetime ECL performing

    (11     16       (5           (35     40       (5      

– to lifetime ECL credit-impaired

          (13     13                   (20     20        

Provision for (reversal of) credit losses (2)

    (22     (11     64       31       3       216       91       310  

Write-offs

                (74     (74                 (97     (97

Recoveries

                17       17                   15       15  

Interest income on impaired loans

                (1     (1                 (2     (2

Foreign exchange and other

    (1           (1     (2                 2       2  

Balance at end of period

  $ 181     $ 535     $ 118     $ 834     $ 185     $ 484     $ 130     $ 799  

Credit card

               

Balance at beginning of period

  $ 136     $ 572     $     $ 708     $ 159     $ 347     $     $ 506  

Originations net of repayments and other derecognitions

    (1     (26           (27     (2     (28           (30

Changes in model

                            (19     54             35  

Net remeasurement (1)

    (88     117       23       52       (7     264       43       300  

Transfers (1)

               

– to 12-month ECL

    79       (79                 45       (45            

– to lifetime ECL performing

    (10     10                   (31     31              

– to lifetime ECL credit-impaired

          (20     20                   (59     59        

Provision for (reversal of) credit losses (2)

    (20     2       43       25       (14     217       102       305  

Write-offs

                (70     (70                 (128     (128

Recoveries

                27       27                   26       26  

Interest income on impaired loans

                                               

Foreign exchange and other

                                  1             1  

Balance at end of period

  $ 116     $ 574     $     $ 690     $ 145     $ 565     $     $ 710  

Business and government

               

Balance at beginning of period

  $ 453     $ 683     $ 652     $ 1,788     $ 231     $ 163     $ 393     $ 787  

Originations net of repayments and other derecognitions

    17       (23     (5     (11     24       (1     (5     18  

Changes in model

                            14       (5           9  

Net remeasurement (1)

    (62     55       118       111       314       246       131       691  

Transfers (1)

               

– to 12-month ECL

    81       (75     (6           13       (11     (2      

– to lifetime ECL performing

    (12     14       (2           (131     133       (2      

– to lifetime ECL credit-impaired

    (2     (12     14                   (12     12        

Provision for (reversal of) credit losses (2)

    22       (41     119       100       234       350       134       718  

Write-offs

                (70     (70                 (16     (16

Recoveries

                3       3                   3       3  

Interest income on impaired loans

                (6     (6                 (3     (3

Foreign exchange and other

    (13     (19     (12     (44     9       4       10       23  

Balance at end of period

  $ 462     $ 623     $ 686     $ 1,771     $ 474     $ 517     $ 521     $ 1,512  

Total ECL allowance (3)

  $ 811     $ 1,868     $ 952     $ 3,631     $ 854     $ 1,648     $ 809     $ 3,311  

Comprises:

               

Loans

  $     724     $     1,808     $     952     $     3,484     $     704     $     1,553     $     807     $     3,064  

Undrawn credit facilities and other off-balance sheet  exposures (4)

    87       60             147       150       95       2       247  

See previous page for footnote references.

 

 

CIBC SECOND QUARTER 2021     55  


Table of Contents
$ millions, as at or for the six months ended   2021
Apr. 30
    2020
Apr. 30
 
    Stage 1     Stage 2     Stage 3           Stage 1     Stage 2     Stage 3        
     Collective
provision
12-month
ECL
performing
    Collective
provision
lifetime
ECL
performing
    Collective and
individual
provision
lifetime ECL
credit-impaired
    Total     Collective
provision
12-month
ECL
performing
    Collective
provision
lifetime
ECL
performing
    Collective and
individual
provision
lifetime ECL
credit-impaired (5)
    Total  

Residential mortgages

               

Balance at beginning of period

  $ 51     $ 161     $ 151     $ 363     $ 28     $ 43     $ 140     $ 211  

Originations net of repayments and other derecognitions

    10       (8     (7     (5     3       (5     (10     (12

Changes in model

                16       16       (2     2              

Net remeasurement (1)

    (57     20       50       13       11       42       47       100  

Transfers (1)

               

– to 12-month ECL

    64       (53     (11           20       (16     (4      

– to lifetime ECL performing

    (5     17       (12           (11     19       (8      

– to lifetime ECL credit-impaired

          (11     11                   (4     4        

Provision for (reversal of) credit losses (2)

    12       (35     47       24       21       38       29       88  

Write-offs

                (12     (12                 (6     (6

Recoveries

                2       2                   2       2  

Interest income on impaired loans

                (9     (9                 (9     (9

Foreign exchange and other

    (3     (7     (8     (18     1       1       2       4  

Balance at end of period

  $ 60     $ 119     $ 171     $ 350     $ 50     $ 82     $ 158     $ 290  

Personal

               

Balance at beginning of period

  $       204     $     546     $     113     $ 863     $ 174     $ 271     $ 128     $ 573  

Originations net of repayments and other derecognitions

    22       (29     (4     (11     17       (22     (7     (12

Changes in model

    (3     1       (1     (3     (33     72             39  

Net remeasurement (1)

    (208     133       107       32       (40     258       145       363  

Transfers (1)

               

– to 12-month ECL

    162       (157     (5           110       (107     (3      

– to lifetime ECL performing

    (19     29       (10           (43     51       (8      

– to lifetime ECL credit-impaired

          (28     28                   (39     39        

Provision for (reversal of) credit losses (2)

    (46     (51     115       18       11       213       166       390  

Write-offs

                (144     (144                 (197     (197

Recoveries

                35       35                   35       35  

Interest income on impaired loans

                (2     (2                 (3     (3

Foreign exchange and other

    (3           (2     (5                 1       1  

Balance at end of period

  $ 155     $ 495     $ 115     $ 765     $ 185     $ 484     $ 130     $ 799  

Credit card

               

Balance at beginning of period

  $ 136     $ 572     $     $ 708     $ 145     $ 340     $     $ 485  

Originations net of repayments and other derecognitions

    (1     (44           (45     (2     (45           (47

Changes in model

                            (6     59             53  

Net remeasurement (1)

    (133     221       49       137       (84     420       83       419  

Transfers (1)

               

– to 12-month ECL

    177       (177                 132       (132            

– to lifetime ECL performing

    (16     16                   (40     40              

– to lifetime ECL credit-impaired

          (137     137                   (117     117        

Provision for (reversal of) credit losses (2)

    27       (121     186       92             225       200       425  

Write-offs

                (244     (244                 (254     (254

Recoveries

                58       58                   54       54  

Interest income on impaired loans

                                               

Foreign exchange and other

                                               

Balance at end of period

  $ 163     $ 451     $     $ 614     $ 145     $ 565     $     $ 710  

Business and government

               

Balance at beginning of period

  $ 453     $ 683     $ 652     $     1,788     $ 239     $ 158     $ 378     $ 775  

Originations net of repayments and other derecognitions

    22       (25     (8     (11     31       (6     (10     15  

Changes in model

                            14       (1     (1     12  

Net remeasurement (1)

    (165     89       132       56       285       268       190       743  

Transfers (1)

               

– to 12-month ECL

    123       (111     (12           37       (33     (4      

– to lifetime ECL performing

    (34     41       (7           (142     145       (3      

– to lifetime ECL credit-impaired

    (4     (25     29                   (20     20        

Provision for (reversal of) credit losses (2)

    (58     (31     134       45       225       353       192       770  

Write-offs

                (136     (136                 (56     (56

Recoveries

                8       8                   6       6  

Interest income on impaired loans

                (11     (11                 (8     (8

Foreign exchange and other

    (25     (33     (27     (85     10       6       9       25  

Balance at end of period

  $ 370     $ 619     $ 620     $ 1,609     $ 474     $ 517     $ 521     $ 1,512  

Total ECL allowance (3)

  $ 748     $     1,684     $ 906     $ 3,338     $ 854     $ 1,648     $ 809     $ 3,311  

Comprises:

               

Loans

  $       665     $     1,629     $     906     $     3,200     $     704     $     1,553     $     807     $     3,064  

Undrawn credit facilities and other off-balance sheet exposures (4)

    83       55             138       150       95       2       247  

See previous page for footnote references.

  

 

56   CIBC SECOND QUARTER 2021


Table of Contents

Inputs, assumptions and model techniques

The uncertainties inherent in the COVID-19 pandemic have increased the level of judgment applied in estimating ECLs. See Note 6 to our consolidated financial statements in our 2020 Annual Report for more information concerning the significant estimates and credit judgment inherent in the estimation of ECL allowances.

The forecasting of forward-looking information and the determination of scenario weightings in the COVID-19 pandemic continued to require a heightened application of judgment in a number of areas as our forecast reflects numerous assumptions and uncertainties regarding the economic impact of the COVID-19 pandemic. The following tables provide the base case, upside case and downside case scenario forecasts for select forward-looking information variables used to estimate our ECL.

 

     Base case     Upside case      Downside case  
As at April 30, 2021   

Average

value over

the next
12 months

    Average
value over
the remaining
forecast period (1)
   

Average

value over

the next
12 months

     Average
value over
the remaining
forecast period (1)
     Average
value over
the next
12 months
    Average
value over
the remaining
forecast period (1)
 

Real GDP year-over-year growth

              

Canada (2)

     5.3  %      2.5  %      7.0  %       3.3  %       3.4  %      1.7  % 

United States

     5.6  %      2.8  %      7.2  %       3.9  %       2.2  %      1.0  % 

Unemployment rate

              

Canada (2)

     7.2  %      6.1  %      6.7  %       5.4  %       8.4  %      7.0  % 

United States

     4.9  %      4.0  %      4.4  %       3.3  %       7.1  %      6.3  % 

Canadian Housing Price Index growth (2)

     4.7  %      4.0  %      8.5  %       5.6  %       (2.8 ) %      1.4  % 

Standard and Poor’s (S&P) 500 Index growth rate

     5.0  %      5.0  %      10.7  %       8.8  %       (7.2 ) %      (5.8 ) % 

West Texas Intermediate Oil Price (US$)

   $     59     $     61     $     70      $     75      $     46     $     48  

 

     Base case     Upside case      Downside case  
As at January 31, 2021    Average
value over
the next
12 months
    Average
value over
the remaining
forecast period (1)
    Average
value over
the next
12 months
     Average
value over
the remaining
forecast period (1)
     Average
value over
the next
12 months
     Average
value over
the remaining
forecast period (1)
 

Real GDP year-over-year growth

               

Canada (2)

     4.0  %      3.9  %      6.0  %       4.4  %       2.5  %       2.1  % 

United States

     4.1  %      3.2  %      5.8  %       4.5  %       1.8  %       1.9  % 

Unemployment rate

               

Canada (2)

     7.8  %      6.1  %      7.3  %       5.7  %       8.6  %       7.4  % 

United States

     5.9  %      4.1  %      4.5  %       3.4  %       7.4  %       5.8  % 

Canadian Housing Price Index growth (2)

     1.5  %      3.2  %      12.2  %       10.2  %       (9.9 )%       0.3  % 

S&P 500 Index growth rate

     5.0  %      5.0  %      13.0  %       10.8  %       (5.5 )%       (2.9 )% 

West Texas Intermediate Oil Price (US$)

   $     50     $     55     $     54      $     62      $     41      $     46  

 

     Base case     Upside case      Downside case  
As at October 31, 2020    Average
value over
the next
12 months
    Average
value over
the remaining
forecast period (1)
    Average
value over
the next
12 months
     Average
value over
the remaining
forecast period (1)
     Average
value over
the next
12 months
     Average
value over
the remaining
forecast period (1)
 

Real GDP year-over-year growth

               

Canada (2)

     1.6  %      3.8  %      3.6  %       4.6  %       0.03  %       2.0  % 

United States

     1.7  %      3.5  %      3.0  %       4.2  %       (0.6 )%       1.7  % 

Unemployment rate

               

Canada (2)

     8.7  %      6.7  %      7.4  %       5.9  %       9.5  %       8.4  % 

United States

     7.4  %      4.7  %      5.1  %       3.5  %       9.2  %       7.3  % 

Canadian Housing Price Index growth (2)

     2.4  %      3.0  %      11.2  %       10.4  %       (6.9 )%       (0.8 )% 

S&P 500 Index growth rate

     5.6  %      4.8  %      11.2  %       7.7  %       (3.5 )%       (5.3 )% 

West Texas Intermediate Oil Price (US$)

   $     42     $     53     $     51      $     60      $     34      $     39  
(1)

The remaining forecast period is generally two to four years.

(2)

National-level forward-looking forecasts are presented in the table above, which represent the aggregation of the provincial-level forecasts used to estimate our ECL. Housing Price Index growth rates are also forecasted at the municipal level in some cases. As a result, the forecasts for individual provinces or municipalities reflected in our ECL will differ from the national forecasts presented above.

As required, the forward-looking information used to estimate ECLs reflects our expectations as at April 30, 2021, January 31, 2021 and October 31, 2020, respectively, and does not reflect changes in expectation as a result of economic forecasts that may have subsequently emerged. The base case, upside case and downside case amounts shown represent the average value of the forecasts over the respective projection horizons. Our economic forecasts are made in the context of the recovery currently underway from the severe downturn experienced in the second calendar quarter of 2020. As at April 30, 2021, our underlying base case projection for Canada is characterized by a deceleration in economic activity and a brief rise in the unemployment rate in the second calendar quarter of 2021 due to temporary restrictions on activity in response to the current wave of infections and the new variants, followed by faster growth in the second half of 2021 as our outlook assumes that effective mass vaccinations will be underway over the spring and summer and that the vaccination programs will be able to effectively respond to the emerging variants. Our base case projection assumes that economic activity will return to pre-COVID-19 levels in Canada just before the end of calendar year 2021, and that the unemployment rate will reach pre-pandemic levels in mid-2022. Due to the faster rollout of mass vaccinations in the U.S. relative to Canada, our base case assumes that the U.S. will experience full economic recovery before Canada.

While vaccination of targeted groups have commenced across much of the world, uncertainty remains about how quickly a large enough majority of the population can be effectively immunized to reduce subsequent rates of infection, including in response to emerging variants of the virus. The downside case forecast still reflects a recovery from the severe low experienced in the second calendar quarter of 2020, but to a much lower level of sustained economic activity. Meanwhile, the upside scenario continues to reflect a quicker recovery with the pre-pandemic level of activity reached in the third calendar quarter of 2021.

 

CIBC SECOND QUARTER 2021     57  


Table of Contents

While there has been a modest overall improvement in our outlook over the past six months, the improvement relative to the October 31, 2020 forecast is not as significant as implied by the annualized forecasts above as a result of the current period’s forecast being less impacted by the more significant downturn experienced in 2020.

The graphs below compare the actual and forecasted base case real GDP levels in Canada and the U.S. on a calendar quarter basis to the forecasts from the first quarter of 2021 for the forecasted periods through 2022:

 

LOGO    LOGO

As indicated above, forecasting forward-looking information for multiple scenarios and determining the probability weighting of the scenarios involves a high degree of management judgment, particularly in light of the COVID-19 pandemic. Assumptions concerning the timing and effectiveness of mass vaccination programs to control the spread of COVID-19 and its variants such that severe restrictions will no longer need to be imposed by governments to limit the impact of subsequent waves of infection, are material to these forecasts.

If we were to only use our base case scenario for the measurement of ECL for our performing loans, our ECL allowance would be $262 million lower than the recognized ECL as at April 30, 2021 (October 31, 2020: $204 million). If we were to only use our downside case scenario for the measurement of ECL for our performing loans, our ECL allowance would be $615 million higher than the recognized ECL as at April 30, 2021 (October 31, 2020: $938 million). This sensitivity is isolated to the measurement of ECL and therefore did not consider changes in the migration of exposures between stage 1 and stage 2 from the determination of the significant increase in credit risk that would have resulted in a 100% base case scenario or a 100% downside case scenario. As a result, our ECL allowance on performing loans could exceed the amount implied by the 100% downside case scenario from the migration of additional exposures from stage 1 to stage 2. Actual credit losses could differ materially from those reflected in our estimates.

 

58   CIBC SECOND QUARTER 2021


Table of Contents

The following tables provide the gross carrying amount of loans, and the contractual amounts of undrawn credit facilities and other off-balance sheet exposures based on the application of our 12-month point-in-time probability of default (PD) under IFRS 9 to our risk management PD bands for retail exposures, and based on our internal risk ratings for business and government exposures. Refer to the “Credit risk” section of our 2020 Annual Report for details on the CIBC risk categories.

Loans(1)

 

$ millions, as at           2021
Apr. 30
            2020
Oct. 31
 
     Stage 1     Stage 2     Stage 3 (2)      Total     Stage 1     Stage 2     Stage 3 (2)      Total  

Residential mortgages

                 

– Exceptionally low

  $ 159,840     $ 4     $      $ 159,844     $ 146,139     $ 2     $      $ 146,141  

– Very low

    46,632       1,939              48,571       45,678       1,166              46,844  

– Low

    10,724       6,253              16,977       12,491       6,042              18,533  

– Medium

    190       5,039              5,229       232       4,924              5,156  

– High

    122       793              915             1,054              1,054  

– Default

                590        590                   654        654  

– Not rated

    1,890       562       169        2,621       1,810       818       155        2,783  

Gross residential mortgages (3)(4)

    219,398       14,590       759        234,747       206,350       14,006       809        221,165  

ECL allowance

    60       119       171        350       51       161       151        363  

Net residential mortgages

    219,338       14,471       588        234,397       206,299       13,845       658        220,802  

Personal

                 

– Exceptionally low

    21,020                    21,020       23,302                    23,302  

– Very low

    3,974       151              4,125       1,618       157              1,775  

– Low

    8,993       2,305              11,298       8,662       2,497              11,159  

– Medium

    1,559       2,447              4,006       1,265       2,768              4,033  

– High

    280       826              1,106       331       769              1,100  

– Default

                138        138                   140        140  

– Not rated

    529       103       46        678       513       159       41        713  

Gross personal (4)

    36,355       5,832       184        42,371       35,691       6,350       181        42,222  

ECL allowance

    134       491       115        740       179       540       113        832  

Net personal

    36,221       5,341       69        41,631       35,512       5,810       68        41,390  

Credit card

                 

– Exceptionally low

    3,279                    3,279       3,285                    3,285  

– Very low

    1,344                    1,344       1,388                    1,388  

– Low

    2,199                    2,199       2,340                    2,340  

– Medium

    2,022       1,327              3,349       1,778       1,973              3,751  

– High

          333              333             472              472  

– Default

                                                 

– Not rated

    116       13              129       135       18              153  

Gross credit card

    8,960       1,673              10,633       8,926       2,463              11,389  

ECL allowance

    153       432              585       125       542              667  

Net credit card

    8,807       1,241              10,048       8,801       1,921              10,722  

Business and government (5)

                 

– Investment grade

    56,264       407              56,671       50,691       307              50,998  

– Non-investment grade

    81,132       5,059              86,191       80,471       7,319              87,790  

– Watchlist

    164       2,949              3,113       447       4,291              4,738  

– Default

                1,391        1,391                   1,359        1,359  

– Not rated

    159       44              203       218       49              267  

Gross business and government (3)(6)

    137,719       8,459       1,391        147,569       131,827       11,966       1,359        145,152  

ECL allowance

    318       587       620        1,525       380       648       650        1,678  

Net business and government

    137,401       7,872       771        146,044       131,447       11,318       709        143,474  

Total net amount of loans

  $     401,767     $     28,925     $     1,428      $     432,120     $     382,059     $     32,894     $     1,435      $     416,388  
(1)

The table excludes debt securities measured at FVOCI, for which ECL allowances of $18 million (October 31, 2020: $22 million) were recognized in AOCI. In addition, the table excludes debt securities classified at amortized cost, for which ECL allowances of $15 million were recognized as at April 30, 2021 (October 31, 2020: $16 million), $13 million of which was stage 3 ECL allowance on originated credit-impaired amortized cost debt securities (October 31, 2020: $14 million). Other financial assets classified at amortized cost were also excluded from the table above as their ECL allowances were immaterial as at April 30, 2021 and October 31, 2020. Financial assets other than loans that are classified as amortized cost are presented on our interim consolidated balance sheet net of ECL allowances.

(2)

Excludes foreclosed assets of $22 million (October 31, 2020: $23 million) which were included in Other assets on our interim consolidated balance sheet.

(3)

Includes $29 million (October 31, 2020: $63 million) of residential mortgages and $23,116 million (October 31, 2020: $23,291 million) of business and government loans that are measured at FVTPL.

(4)

The internal risk rating grades presented for residential mortgages and certain personal loans do not take into account loan guarantees or insurance issued by the Canadian government (federal or provincial), Canadian government agencies, or private insurers, as the determination of whether a significant increase in credit risk has occurred for these loans is based on relative changes in the loans’ lifetime PD without considering collateral or other credit enhancements.

(5)

Certain prior period amounts were restated.

(6)

Includes customers’ liability under acceptances of $11,002 million (October 31, 2020: $9,606 million).

 

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Undrawn credit facilities and other off-balance sheet exposures

$ millions, as at                        2021
Apr. 30
                         2020
Oct. 31
 
     Stage 1     Stage 2     Stage 3     Total     Stage 1     Stage 2     Stage 3     Total  

Retail

               

– Exceptionally low

  $ 132,460     $ 4     $     $ 132,464     $ 124,690     $ 8     $     $ 124,698  

– Very low

    7,354       137             7,491       6,632       137             6,769  

– Low

    8,712       497             9,209       8,703       416             9,119  

– Medium

    906       597             1,503       909       692             1,601  

– High

    96       435             531       263       503             766  

– Default

                30       30                   28       28  

– Not rated

    393       13             406       411       23             434  

Gross retail

    149,921       1,683       30       151,634       141,608       1,779       28       143,415  

ECL allowance

    31       23             54       36       36             72  

Net retail

    149,890       1,660       30       151,580       141,572       1,743       28       143,343  

Business and government (1)

               

– Investment grade

    97,809       117             97,926       89,883       149             90,032  

– Non-investment grade

    56,261       2,144             58,405       55,910       3,679             59,589  

– Watchlist

    15       1,118             1,133       91       1,665             1,756  

– Default

                119       119                   129       129  

– Not rated

    556       26             582       795       41             836  

Gross business and government

    154,641       3,405       119       158,165       146,679       5,534       129       152,342  

ECL allowance

    52       32             84       73       35       2       110  

Net business and government

    154,589       3,373       119       158,081       146,606       5,499       127       152,232  

Total net undrawn credit facilities and other off-balance sheet exposures

  $     304,479     $     5,033     $     149     $     309,661     $     288,178     $     7,242     $     155     $     295,575  
(1)

Certain prior period amounts were restated.

Note 7.    Deposits(1)(2)

$ millions, as at                            2021
Apr. 30
     2020
Oct. 31
 
      Payable on
demand 
(3)
     Payable
after notice 
(4)
     Payable on a
fixed date 
(5)(6)
     Total      Total  

Personal

   $     15,493      $     139,262      $     52,273      $ 207,028      $ 202,152  

Business and government (7)

     90,153        76,422        146,626        313,201        311,426  

Bank

     9,095        477        7,568        17,140        17,011  

Secured borrowings (8)

                   39,194        39,194        40,151  
     $ 114,741      $ 216,161      $ 245,661      $ 576,563      $ 570,740  

Comprised of:

              

Held at amortized cost

            $ 559,454      $ 557,321  

Designated at fair value

                                17,109        13,419  
                                $ 576,563      $ 570,740  

Total deposits include (9):

              

Non-interest-bearing deposits

              

Canada

            $ 80,976      $ 71,122  

U.S.

              13,779        13,833  

Other international

              5,098        5,798  

Interest-bearing deposits

              

Canada

              380,765        389,439  

U.S.

              71,960        66,399  

Other international

                                23,985        24,149  
                                $     576,563      $     570,740  
(1)

Includes deposits of $195.6 billion (October 31, 2020: $185.2 billion) denominated in U.S. dollars and deposits of $30.9 billion (October 31, 2020: $30.2 billion) denominated in other foreign currencies.

(2)

Net of purchased notes of $3.7 billion (October 31, 2020: $3.1 billion).

(3)

Includes all deposits for which we do not have the right to require notice of withdrawal. These deposits are generally chequing accounts.

(4)

Includes all deposits for which we can legally require notice of withdrawal. These deposits are generally savings accounts.

(5)

Includes all deposits that mature on a specified date. These deposits are generally term deposits, guaranteed investment certificates, and similar instruments.

(6)

Includes $23.9 billion (October 31, 2020: $19.9 billion) of deposits which are subject to the bank recapitalization (bail-in) conversion regulations issued by the Department of Finance Canada. These regulations provide certain statutory powers to the Canada Deposit Insurance Corporation (CDIC), including the ability to convert specified eligible shares and liabilities of CIBC into common shares in the event that CIBC is determined to be non-viable.

(7)

Includes $301 million (October 31, 2020: $303 million) of Notes issued to CIBC Capital Trust.

(8)

Comprises liabilities issued by, or as a result of, activities associated with the securitization of residential mortgages, covered bond programme, and consolidated securitization vehicles.

(9)

Classification is based on geographical location of the CIBC office.

Note 8.    Subordinated indebtedness

On January 26, 2021, we redeemed all $1.0 billion of our 3.42% Debentures due January 26, 2026. In accordance with their terms, the Debentures

were redeemed at 100% of their principal amount, plus accrued and unpaid interest thereon.

On April 19, 2021, we issued $1.0 billion principal amount of 1.96% Debentures due April 21, 2031 (subordinated indebtedness). The Debentures bear interest at a fixed rate of 1.96% per annum (paid semi-annually) until April 21, 2026, and at three-month CDOR plus 0.56% per annum (paid quarterly) thereafter until maturity on April 21, 2031.

 

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Note 9.    Share capital

Common shares

    For the three
months ended
          For the six
months ended
 
$ millions, except number of shares          2021
Apr. 30
           2021
Jan. 31
           2020
Apr. 30
                 2021
Apr. 30
           2020
Apr. 30
 
     Number
of shares
    Amount     Number
of shares
    Amount     Number
of shares
    Amount           Number
of shares
    Amount     Number
of shares
    Amount  

Balance at beginning of period

    447,849,605       $    13,991       447,085,329     $ 13,908       444,981,533     $ 13,669         447,085,329       $    13,908       445,341,675     $ 13,591  

Issuance pursuant to:

                         

Equity-settled share-based compensation plans (1)

    643,481       66       294,626       29       71,409       8         938,107       95       546,357       59  

Shareholder investment plan

    259,931       33       294,164       32       454,791       36         554,095       65       788,795       72  

Employee share purchase plan

    309,137       37       346,076       38       376,684       34         655,213       75       700,963       70  
    449,062,154       $    14,127       448,020,195     $ 14,007       445,884,417     $ 13,747         449,232,744       $    14,143       447,377,790     $ 13,792  

Purchase of common shares for cancellation

                            (710,800     (22                   (2,208,600     (68

Treasury shares

    30,972       3       (170,590     (16     (40,261     (3       (139,618     (13     (35,834     (2

Balance at end of period

    449,093,126       $    14,130       447,849,605     $     13,991       445,133,356     $     13,722         449,093,126       $    14,130       445,133,356     $     13,722  
(1)

Includes the settlement of contingent consideration related to prior acquisitions.

Regulatory capital and leverage ratios

Our capital ratios and leverage ratio are presented in the table below:

$ millions, as at        2021
Apr. 30
     2020
Oct. 31
 

Common Equity Tier 1 (CET1) capital (1)

    $     31,915      $ 30,876  

Tier 1 capital

  A     35,759        34,775  

Total capital

      41,826        40,969  

Total risk-weighted assets (RWA)

      257,997        254,871  

CET1 ratio

      12.4  %       12.1  % 

Tier 1 capital ratio

      13.9  %       13.6  % 

Total capital ratio

      16.2  %       16.1  % 

Leverage ratio exposure (2)

  B   $     767,391      $     741,760  

Leverage ratio

  A/B     4.7  %       4.7  % 
(1)

Includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020. The transitional arrangement results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount is subject to certain adjustments and limitations until fiscal 2022.

(2)

Includes the impact of regulatory flexibility provided by OSFI in respect of exposures arising from central bank reserves and sovereign-issued securities that qualify as high quality liquid assets. The treatment specified by OSFI permits these items to be excluded from the leverage ratio exposure measure.

Our regulatory capital requirements are determined in accordance with guidelines issued by OSFI, which are based upon the capital standards developed by the Basel Committee on Banking Supervision.

CIBC has been designated by OSFI as a domestic systemically important bank (D-SIB) in Canada, and is subject to a CET1 surcharge equal to 1.0% of RWA. OSFI also currently expects D-SIBs to hold a 1.0% Domestic Stability Buffer (DSB). This results in current targets, including all buffer requirements, for CET1, Tier 1 and Total capital ratios of 9.0%, 10.5%, and 12.5%, respectively. These targets may be higher for certain institutions at OSFI’s discretion.

During the quarter ended April 30, 2021, we have complied with OSFI’s regulatory capital requirements.

Note 10.    Post-employment benefits

The following tables provide details on the post-employment benefit expense recognized in the interim consolidated statement of income and on the remeasurements recognized in the interim consolidated statement of comprehensive income:

Defined benefit plan expense

    For the three
months ended
          For the six
months ended
 
$ millions   2021
Apr. 30
    2021
Jan. 31
    2020
Apr. 30
    2021
Apr. 30
    2021
Jan. 31
    2020
Apr. 30
          2021
Apr. 30
    2020
Apr. 30
    2021
Apr. 30
    2020
Apr. 30
 
            Pension plans     Other
post-employment plans
          Pension plans     Other
post-employment plans
 

Current service cost

  $     70     $ 71     $ 70     $     2     $ 2     $     4       $     141     $ 138     $     4     $ 7  

Past service cost (1)

                                                (32           (1

Net interest (income) expense

    (4     (4     (2     4       4       5         (8     (5     8       10  

Special termination benefits (1)

                                                9              

Plan administration costs

    2       2       2                           4       4              

Net defined benefit plan expense recognized in net income

  $ 68     $     69     $     70     $ 6     $     6     $ 9       $ 137     $     114     $ 12     $     16  
(1)

Includes amounts related to the restructuring recognized in 2020.

 

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Defined contribution plan expense

     For the three
months ended
           For the six
months ended
 
$ millions    2021
Apr. 30
     2021
Jan. 31
     2020
Apr. 30
           2021
Apr. 30
     2020
Apr. 30
 

Defined contribution pension plans

   $     13      $     11      $ 8        $ 24      $ 17  

Government pension plans (1)

     38        36        37          74        72  

Total defined contribution plan expense

   $ 51      $ 47      $     45        $     98      $     89  
(1)

Includes Canada Pension Plan, Quebec Pension Plan, and U.S. Federal Insurance Contributions Act.

Remeasurement of employee defined benefit plans(1)

    For the three
months ended
          For the six
months ended
 
$ millions   2021
Apr. 30
    2021
Jan. 31
    2020
Apr. 30
    2021
Apr. 30
   

2021

Jan. 31

    2020
Apr. 30
          2021
Apr. 30
    2020
Apr. 30
    2021
Apr. 30
    2020
Apr. 30
 
            Pension plans     Other
post-employment plans
          Pension plans     Other
post-employment plans
 

Net actuarial gains (losses) on defined benefit obligation

  $     674     $ 60     $ 487     $     37     $ 3     $ 30       $     734     $ 59     $     40     $ 1  

Net actuarial gains (losses) on plan assets

    (267     207       (178                         (60     137              

Changes in asset ceiling excluding interest income

                (3                               (2            

Net remeasurement gains (losses) recognized in OCI

  $ 407     $     267     $     306     $ 37     $     3     $     30       $ 674     $     194     $ 40     $     1  
(1)

The Canadian post-employment defined benefit plans are remeasured on a quarterly basis for changes in the discount rate and for actual asset returns. All other Canadian plans’ actuarial assumptions and foreign plans’ actuarial assumptions are updated at least annually.

Note 11.    Income taxes

Enron

In prior years, the Canada Revenue Agency (CRA) issued reassessments disallowing the deduction of Enron settlement payments and related legal expenses (the “Enron expenses”). In January 2019, CIBC entered into a settlement agreement (the “Agreement”) with the CRA that provides certainty with respect to the portion of the Enron expenses deductible in Canada. The Agreement resulted in the recognition of a net $38 million tax recovery in the first quarter of 2019. This recovery was determined after taking into account taxable refund interest in Canada and also the portion of the Enron expenses that are expected to be deductible in the United States (the “U.S. deduction”). The U.S. deduction has not been agreed to by the Internal Revenue Service. It is possible that adjustments may be required to the amount of tax benefits recognized in the U.S.

Dividend Received Deduction

The CRA has reassessed CIBC approximately $1,115 million of additional income tax by denying the tax deductibility of certain 2011 to 2015 Canadian corporate dividends on the basis that they were part of a “dividend rental arrangement”. In addition, the CRA has proposed to reassess $305 million for 2016. The dividends that were subject to the reassessments and proposed reassessment for 2016 are similar to those prospectively addressed by the rules in the 2015 and 2018 Canadian federal budgets. It is possible that subsequent years may be reassessed for similar activities. CIBC is confident that its tax filing positions were appropriate and intends to defend itself vigorously. Accordingly, no amounts have been accrued in the interim consolidated financial statements.

Note 12.    Earnings per share

 

   

For the three

months ended

         

For the six

months ended

 
$ millions, except number of shares and per share amounts   2021
Apr. 30
    2021
Jan. 31
     2020
Apr. 30
          2021
Apr. 30
    2020
Apr. 30
 

Basic earnings per share

                

Net income attributable to equity shareholders

  $ 1,647     $       1,621      $         400       $       3,268     $       1,605  

Less: Preferred share dividends and distributions on other equity instruments

    51       30        30         81       61  

Net income attributable to common shareholders

  $ 1,596     $ 1,591      $ 370       $ 3,187     $ 1,544  

Weighted-average common shares outstanding (thousands)

    448,455       447,281        444,739         447,859       444,997  

Basic earnings per share

  $ 3.56     $ 3.56      $ 0.83       $ 7.12     $ 3.47  

Diluted earnings per share

                

Net income attributable to common shareholders

  $ 1,596     $ 1,591      $ 370       $ 3,187     $ 1,544  

Weighted-average common shares outstanding (thousands)

    448,455       447,281        444,739         447,859       444,997  

Add: Stock options potentially exercisable (1) (thousands)

    796       502        302         628       439  

Add: Equity-settled consideration (thousands)

    94       146        147         134       174  

Weighted-average diluted common shares outstanding (thousands)

          449,345           447,929            445,188         448,621           445,610  

Diluted earnings per share

  $ 3.55     $ 3.55      $ 0.83       $ 7.10     $ 3.46  
(1)

Excludes average options outstanding of nil (January 31, 2021: 3,840,348; April 30, 2020: 4,839,980) with a weighted-average exercise price of nil (January 31, 2021: $112.71; April 30, 2020: $108.08) for the quarter ended April 30, 2021, and average options outstanding of 737,167 (April 30, 2020: 3,681,010) with a weighted-average price of $120.02 (April 30, 2020: $111.56) for the six months ended April 30, 2021, as the options’ exercise prices were greater than the average market price of CIBC’s common shares.

 

62   CIBC SECOND QUARTER 2021


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Note 13.    Contingent liabilities and provisions

Legal proceedings and other contingencies

In the ordinary course of its business, CIBC is a party to a number of legal proceedings, including regulatory investigations, in which claims for substantial monetary damages are asserted against CIBC and its subsidiaries. Legal provisions are established if, in the opinion of management, it is both probable that an outflow of economic benefits will be required to resolve the matter, and a reliable estimate can be made of the amount of the obligation. If the reliable estimate of probable loss involves a range of potential outcomes within which a specific amount appears to be a better estimate, that amount is accrued. If no specific amount within the range of potential outcomes appears to be a better estimate than any other amount, the mid-point in the range is accrued. In some instances, however, it is not possible either to determine whether an obligation is probable or to reliably estimate the amount of loss, in which case no accrual can be made.

While there is inherent difficulty in predicting the outcome of legal proceedings, based on current knowledge and in consultation with legal counsel, we do not expect the outcome of these matters, individually or in aggregate, to have a material adverse effect on our interim consolidated financial statements. However, the outcome of these matters, individually or in aggregate, may be material to our operating results for a particular reporting period. We regularly assess the adequacy of CIBC’s litigation accruals and make the necessary adjustments to incorporate new information as it becomes available.

The provisions disclosed in Note 22 to the consolidated financial statements included in our 2020 Annual Report included all of CIBC’s accruals for legal matters as at that date, including amounts related to the significant legal proceedings described in that note and to other legal matters.

CIBC considers losses to be reasonably possible when they are neither probable nor remote. It is reasonably possible that CIBC may incur losses in addition to the amounts recorded when the loss accrued is the mid-point of a range of reasonably possible losses, or the potential loss pertains to a matter in which an unfavourable outcome is reasonably possible but not probable.

CIBC believes the estimate of the aggregate range of reasonably possible losses, in excess of the amounts accrued, for its significant legal proceedings, where it is possible to make such an estimate, is from nil to approximately $1.2 billion as at April 30, 2021. This estimated aggregate range of reasonably possible losses is based upon currently available information for those significant proceedings in which CIBC is involved, taking into account CIBC’s best estimate of such losses for those cases for which an estimate can be made. CIBC’s estimate involves significant judgment, given the varying stages of the proceedings and the existence of multiple defendants in many of such proceedings whose share of the liability has yet to be determined. The range does not include potential punitive damages and interest. The matters underlying the estimated range as at April 30, 2021, consist of the significant legal matters disclosed in Note 22 to the consolidated financial statements included in our 2020 Annual Report as updated below. The matters underlying the estimated range will change from time to time, and actual losses may vary significantly from the current estimate. For certain matters, CIBC does not believe that an estimate can currently be made as many of them are in preliminary stages and certain matters have no specific amount claimed. Consequently, these matters are not included in the range.

The following developments related to our significant legal proceedings occurred since the issuance of our 2020 annual consolidated financial statements:

 

Credit card class actions – Interchange fees litigation: Five of the seven actions have been settled subject to court approval and the remaining two actions will be stayed. CIBC will contribute towards a proposed settlement.

 

Pilon v. Amex Bank of Canada, et al.: The plaintiff’s appeal of the decision denying certification was heard in February 2021. In March 2021, the court dismissed the plaintiff’s appeal. In May 2021, the plaintiff filed a motion seeking leave to appeal to the Supreme Court of Canada.

 

Simplii privacy class actions: The Bannister and Steinman actions have been settled subject to court approval. Pursuant to the proposed settlement, CIBC will pay $2 million to settle these actions. In April 2021, the court approved the proposed settlement.

 

Order Execution Only class actions: The certification motion in Frayce is scheduled for August 2022, and the Michaud action has been stayed.

 

Pope v. CIBC and CIBC Trust: In December 2020, CIBC Asset Management Inc. was added as a defendant. The certification motion is scheduled for August 2021.

 

Fresco v. Canadian Imperial Bank of Commerce: The Court of Appeal hearing is scheduled for September 2021.

 

Salko v. CIBC Investor Services Inc. et al: In March 2021, a proposed class action was commenced in Quebec against CIBC Investor Services Inc. and several other financial institutions. The plaintiff subsequently added CIBC World Markets Inc. and additional financial institutions as defendants. The action seeks the reimbursement of currency conversion fees alleged to have been unlawfully charged to class members and concealed by the defendants, as well as exemplary and punitive damages. The plaintiff seeks reimbursement of fees charged to clients since March 15, 2018, as well as punitive damages in the amount of 5% of the total sum of fees charged to class members, plus interest.

 

The RRSP of J.T.G v. Her Majesty The Queen: CIBC Trust Corporation is the trustee of a self-directed RRSP that has been the subject of proceedings in the Tax Court of Canada. The proceedings arise from appeals of tax assessments made by the Minister of National Revenue against the RRSP for the 2004 to 2009 taxation years under Parts I and XI.1 of the Income Tax Act (Canada). At the time they were made in March 2013, the Part I assessment amounted to approximately $139 million and the Part XI.1 reassessment totalled approximately $144 million, in each case including all taxes, penalties and interest. In April 2021, the Tax Court of Canada released a decision allowing the appeal in part of the assessment under Part I and dismissing the appeal of the reassessment under Part XI.1. The RRSP has appealed this decision to the Federal Court of Appeal. To the extent there is a shortfall in the RRSP’s ability to satisfy any of the Part XI.1 reassessment that may be upheld by the courts, CIBC Trust may be liable to pay a portion of that reassessment.

Other than the items described above, there are no significant developments in the matters identified in Note 22 to the consolidated financial statements included in our 2020 Annual Report, and no new significant legal proceedings have arisen since the issuance of our 2020 annual consolidated financial statements.

 

CIBC SECOND QUARTER 2021     63  


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Note 14.    Interest income and expense

The table below provides the consolidated interest income and expense by accounting categories.

 

   

For the three

months ended

         

For the six

months ended

 
$ millions   2021
Apr. 30
    2021
Jan. 31
    2020
Apr. 30
          2021
Apr. 30
    2020
Apr. 30
 
     Interest
income
    Interest
expense
    Interest
income
    Interest
expense
    Interest
income
    Interest
expense
          Interest
income
    Interest
expense
    Interest
income
    Interest
expense
 

Measured at amortized cost (1)

  $     3,098     $        703     $     3,256     $     814     $     3,998     $     1,858       $     6,354     $     1,517     $     8,433     $     4,184  

Debt securities measured at FVOCI (1)

    83       n/a       98       n/a       206       n/a         181       n/a       446       n/a  

Other (2)

    392       123       417       118       498       82         809       241       1,005       177  

Total

  $ 3,573     $ 826     $ 3,771     $ 932     $ 4,702     $ 1,940       $ 7,344     $ 1,758     $ 9,884     $ 4,361  
(1)

Interest income for financial instruments that are measured at amortized cost and debt securities that are measured at FVOCI is calculated using the effective interest rate method.

(2)

Includes interest income and expense and dividend income for financial instruments that are mandatorily measured and designated at FVTPL and equity securities designated at FVOCI.

n/a

Not applicable.

Note 15.    Segmented information

CIBC has four strategic business units (SBUs) – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth Management, and Capital Markets. These SBUs are supported by Corporate and Other.

Canadian Personal and Business Banking provides personal and business clients across Canada with financial advice, products and services through banking centre, digital, mobile and remote channels.

Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented banking and wealth management services to middle-market companies, entrepreneurs, high-net-worth individuals and families across Canada, as well as asset management services to institutional investors.

U.S. Commercial Banking and Wealth Management provides commercial banking and private wealth services across the U.S., as well as personal and small business banking services in four U.S. Midwestern markets and focuses on middle-market and mid-corporate companies and high-net-worth individuals and families.

Capital Markets provides integrated global markets products and services, investment banking advisory and execution, corporate banking solutions and top-ranked research to our clients around the world. It includes Direct Financial Services which focuses on expanding CIBC’s digitally-enabled capabilities to provide a cohesive set of direct banking, direct investing and innovative multi-currency payment solutions for CIBC’s clients.

Corporate and Other includes the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture and Brand, Finance and Enterprise Strategy, as well as other support groups. The expenses of these functional and support groups are generally allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic investments, as well as other income statement and balance sheet items not directly attributable to the business lines.

Changes made to our business segments

The following changes were made in the first quarter of 2021:

 

Simplii Financial and CIBC Investor’s Edge, previously reported in Canadian Personal and Business Banking, are now part of the newly-created Direct Financial Services line of business in Capital Markets, along with certain other direct payment services that were previously in Capital Markets. This change was made to align with the mandates of the relevant SBUs.

 

The financial results associated with U.S. treasury activities in U.S. Commercial Banking and Wealth Management are now included within Treasury in Corporate and Other. In addition, the transfer pricing methodology between U.S. Commercial Banking and Wealth Management and Treasury in Corporate and Other has been enhanced. Both changes align the treatment of U.S. Commercial Banking and Wealth Management with our other SBUs, and allow for better management of interest rate and liquidity risks.

These changes impacted the results of our SBUs. Prior period amounts were revised accordingly. There was no impact on consolidated net income resulting from these changes.

 

64   CIBC SECOND QUARTER 2021


Table of Contents
$   millions, for the three months ended   Canadian
Personal
and Business
Banking
    Canadian
Commercial
Banking
and Wealth
Management
    U.S.
Commercial
Banking
and Wealth
Management
    Capital
Markets
    Corporate
and Other
    CIBC
Total
 

2021

  

Net interest income (1)

  $ 1,425     $ 305     $ 351     $ 662     $ 4     $ 2,747  

Apr. 30

  

Non-interest income (2)

    516       830       181       532       126       2,185  
  

Total revenue (1)

    1,941       1,135       532       1,194       130       4,932  
  

Provision for (reversal of) credit losses

    65       (18     (12     (11     8       32  
  

Amortization and impairment (3)

    53       7       27       3       159       249  
    

Other non-interest expenses

    1,005       601       244       535       122       2,507  
  

Income (loss) before income taxes

    818       545       273       667       (159     2,144  
    

Income taxes (1)

    215       146       57       172       (97     493  
    

Net income (loss)

  $ 603     $ 399     $ 216     $ 495     $ (62   $ 1,651  
  

Net income (loss) attributable to:

           
  

Non-controlling interests

  $     $     $     $     $ 4     $ 4  
    

Equity shareholders

    603       399       216       495       (66     1,647  
    

Average assets (4)

  $ 266,763     $ 67,969     $ 46,364     $ 250,627     $ 163,650     $ 795,373  

2021

  

Net interest income (1)

  $ 1,483     $ 298     $ 374     $ 682     $ 2     $ 2,839  

Jan. 31

  

Non-interest income (2)

    542       790       187       492       113       2,124  
  

Total revenue (1)

    2,025       1,088       561       1,174       115       4,963  
  

Provision for credit losses

    54       33       45       5       10       147  
  

Amortization and impairment (3)

    53       7       28       2       147       237  
    

Other non-interest expenses

    1,033       565       252       520       119       2,489  
  

Income (loss) before income taxes

    885       483       236       647       (161     2,090  
    

Income taxes (1)

    233       129       48       154       (99     465  
    

Net income (loss)

  $ 652     $ 354     $ 188     $ 493     $ (62   $ 1,625  
  

Net income (loss) attributable to:

           
  

Non-controlling interests

  $     $     $     $     $ 4     $ 4  
    

Equity shareholders

    652       354       188       493       (66     1,621  
    

Average assets (4)

  $     261,542     $     65,774     $     47,501     $     250,418     $     174,713     $     799,948  

2020

  

Net interest income (1)

  $ 1,432     $ 321     $ 370     $ 568     $ 71     $ 2,762  

Apr. 30 (5)

  

Non-interest income (2)

    504       704       141       399       68       1,816  
  

Total revenue (1)

    1,936       1,025       511       967       139       4,578  
  

Provision for credit losses

    640       186       230       236       120       1,412  
  

Amortization and impairment (3)

    57       7       34       2       180       280  
    

Other non-interest expenses

    1,017       552       257       490       108       2,424  
  

Income (loss) before income taxes

    222       280       (10     239       (269     462  
    

Income taxes (1)

    59       74       (25     62       (100     70  
    

Net income (loss)

  $ 163     $ 206     $ 15     $ 177     $ (169   $ 392  
  

Net income (loss) attributable to:

           
  

Non-controlling interests

  $     $     $     $     $ (8   $ (8
    

Equity shareholders

    163       206       15       177       (161     400  
    

Average assets (4)

  $ 251,898     $ 66,931     $ 49,182     $ 235,064     $ 122,626     $ 725,701  
(1)

Capital Markets net interest income and income taxes includes a taxable equivalent basis (TEB) adjustment of $51 million for the three months ended April 30, 2021 (January 31, 2021: $54 million; April 30, 2020: $46 million) with an equivalent offset in Corporate and Other.

(2)

Includes intersegment revenue, which represents internal sales commissions and revenue allocations under the Manufacturer / Customer Segment / Distributor Management Model.

(3)

Comprises amortization and impairment of buildings, right-of-use assets, furniture, equipment, leasehold improvements, software and other intangible assets. The three months ended April 30, 2020 includes goodwill impairment.

(4)

Assets are disclosed on an average basis as this measure is most relevant to a financial institution and is the measure reviewed by management.

(5)

Certain prior period information has been revised. See the “Changes made to our business segments” section for additional details.

 

$   millions, for the six months ended    Canadian
Personal
and Business
Banking
     Canadian
Commercial
Banking
and Wealth
Management
     U.S.
Commercial
Banking
and Wealth
Management
     Capital
Markets
     Corporate
and Other
     CIBC
Total
 

2021

  

Net interest income (1)

   $ 2,908      $ 603      $ 725      $ 1,344      $ 6      $ 5,586  

Apr. 30

  

Non-interest income (2)

     1,058        1,620        368        1,024        239        4,309  
  

Total revenue (1)

     3,966        2,223        1,093        2,368        245        9,895  
  

Provision for (reversal of) credit losses

     119        15        33        (6      18        179  
  

Amortization and impairment (3)

     106        14        55        5        306        486  
    

Other non-interest expenses

     2,038        1,166        496        1,055        241        4,996  
  

Income (loss) before income taxes

     1,703        1,028        509        1,314        (320      4,234  
    

Income taxes (1)

     448        275        105        326        (196      958  
    

Net income (loss)

   $ 1,255      $ 753      $ 404      $ 988      $ (124    $ 3,276  
  

Net income (loss) attributable to:

                 
  

Non-controlling interests

   $      $      $      $      $ 8      $ 8  
    

Equity shareholders

     1,255        753        404        988        (132      3,268  
    

Average assets (4)

   $ 264,109      $ 66,853      $ 46,942      $ 250,521      $ 169,273      $ 797,698  

2020

  

Net interest income (1)

   $     2,937      $ 636      $ 712      $     1,066      $     172      $     5,523  

Apr. 30 (5)

  

Non-interest income (2)

     1,078            1,444        300        907        181        3,910  
  

Total revenue (1)

     4,015        2,080            1,012        1,973        353        9,433  
  

Provision for credit losses

     851        221        245        230        126        1,673  
  

Amortization and impairment (3)

     114        14        66        5        327        526  
    

Other non-interest expenses

     2,046        1,106        523        979        589        5,243  
  

Income (loss) before income taxes

     1,004        739        178        759        (689      1,991  
    

Income taxes (1)

     266        197        (2      204        (278      387  
    

Net income (loss)

   $ 738      $ 542      $ 180      $ 555      $ (411    $ 1,604  
  

Net income (loss) attributable to:

                 
  

Non-controlling interests

   $      $      $      $      $ (1    $ (1
    

Equity shareholders

     738        542        180        555        (410      1,605  
    

Average assets (4)

   $     251,745      $     66,085      $     46,972      $     223,998      $     113,562      $     702,362  
(1)

Capital Markets net interest income and income taxes includes a TEB adjustment of $105 million, for the six months ended April 30, 2021 (April 30, 2020: $95 million) with an equivalent offset in Corporate and Other.

(2)

Includes intersegment revenue, which represents internal sales commissions and revenue allocations under the Manufacturer / Customer Segment / Distributor Management Model.

(3)

Comprises amortization and impairment of buildings, right-of-use assets, furniture, equipment, leasehold improvements, software and other intangible assets. The six months ended April 30, 2020 includes goodwill impairment.

(4)

Assets are disclosed on an average basis as this measure is most relevant to a financial institution and is the measure reviewed by management.

(5)

Certain prior period information has been revised. See the “Changes made to our business segments” section for additional details.

 

CIBC SECOND QUARTER 2021     65  


Table of Contents

TO REACH US:

Corporate Secretary: Shareholders may call 416-980-3096, or e-mail: corporate.secretary@cibc.com

Investor Relations: Financial analysts, portfolio managers and other investors requiring financial information may call 416-813-3743, or e-mail: investorrelations@cibc.com

Communications and Public Affairs: Financial, business and trade media may e-mail: corpcommmailbox@cibc.com

CIBC Telephone Banking: As part of our commitment to our clients, information about CIBC products and services is available by calling 1-800-465-2422 toll-free across Canada.

Online Investor Presentations: Supplementary financial information, Pillar 3 Report and Supplementary regulatory capital disclosure, and a presentation to investors and analysts are available at www.cibc.com; About CIBC.

Earnings Conference Call: CIBC’s second quarter conference call with analysts and investors will take place on Thursday, May 27, 2021 at 7:30 a.m. (ET). The call will be available in English (416-340-2217, or toll-free 1-800-806-5484, passcode 8335491#) and French (514-392-1587, or toll-free 1-877-395-0279, passcode 7008374#). A telephone replay of the conference call will be available in English and French until 11:59 p.m. (ET) June 20, 2021. To access the replay in English, call 905-694-9451 or 1-800-408-3053, passcode 1725009#. To access the replay in French, call 514-861-2272 or 1-800-408-3053, passcode 8504384#.

Audio Webcast: A live audio webcast of CIBC’s second quarter results conference call will take place on Thursday, May 27, 2021 at 7:30 a.m. (ET) in English and French. To access the audio webcast, go to www.cibc.com; About CIBC. An archived version of the audio webcast will also be available in English and French following the call on www.cibc.com; About CIBC.

Annual Meeting: CIBC’s next Annual Meeting of Shareholders will be held on April 7, 2022.

Regulatory Capital: Information on CIBC’s regulatory capital instruments and regulatory capital position may be found at www.cibc.com; About CIBC; Investor Relations; Regulatory Capital Instruments.

Bail-in Debt: Information on CIBC’s bail-in debt and TLAC instruments may be found at www.cibc.com; About CIBC; Investor Relations; Debt Information; Bail-in Debt.

Nothing in CIBC’s website www.cibc.com should be considered incorporated herein by reference.

 

DIRECT DIVIDEND DEPOSIT SERVICE

Canadian-resident holders of common shares may have their dividends deposited directly into their account at any financial institution which is a member of Payments Canada. To arrange, please write to AST Trust Company (Canada), P.O. Box 700 Postal Station B, Montreal, QC H3B 3K3 or e-mail: inquiries@astfinancial.com

SHAREHOLDER INVESTMENT PLAN

Registered holders of CIBC common shares wishing to acquire additional common shares may participate in the Shareholder Investment Plan and pay no brokerage commissions or service charges.

For a copy of the offering circular, contact AST Trust Company (Canada) at 416-682-3860, toll-free at 1-800-258-0499, or by e-mail at inquiries@astfinancial.com.

PURCHASE PRICE OF COMMON SHARES

UNDER THE

SHAREHOLDER INVESTMENT PLAN

 

Date          Share
purchase
option
    

Dividend

reinvestment & stock

dividend options

Feb. 1/21

      $109.86     

Mar. 1/21

      $116.97     

Apr. 1/21

      $124.82     

Apr. 28/21

                  

$126.02

 

 

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Canadian Imperial Bank of Commerce

Head Office: Commerce Court, Toronto, Ontario, M5L 1A2, Canada

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