A CIBC sign is shown in the financial district in Toronto in August, 2017. Lower revenue from interest rate and commodities trading as well as equity and debt underwriting were primarily to blame for the decline in net income.Nathan Denette
CIBC's capital-markets arm got a boost from its equity-trading business, even as the division's overall profit dipped compared with an exceptionally strong first quarter of 2017.
CIBC reported a $322-million first-quarter profit for its capital-markets division. That's up 45 per cent from the previous quarter, but down nearly 8 per cent from a year ago, when the banks' trading revenue benefited from an upswing in stock markets following the U.S. election.
Lower revenue from interest rate and commodities trading as well as equity and debt underwriting were primarily to blame for the decline in net income. However, that was partially offset by increases in revenue from equity trading and, in particular, equity derivatives trading, as well as corporate banking.
"We saw strong client-driven activity in general, with quarter-over-quarter growth in essentially all of our trading business, but particularly strong results in our equity derivatives space," Harry Culham, head of CIBC Capital Markets, said during a conference call to discuss the bank's results.
And early indicators suggest the trend may continue into the second quarter, helped by recent volatility in the stock markets, Mr. Culham added.
"Based on what's happening in the market in terms of client activity, in terms of the type of business we're seeing, we're off to quite a strong start in quarter two as well," Mr. Culham said.
"As you know from watching the markets closely, we saw a pickup in volatility as we got to the very end of January and then obviously in quarter two, into February."
CIBC's capital-markets division had $801-million of revenue during the quarter, down 3.5 per cent from $830-million a year ago, but up 28 per cent from the previous quarter when it reported $622-million of revenue.
CIBC analyst Rob Sedran had predicted year-over-year declines in net income and revenue, given that trading results in the first quarter of 2017 got a big boost from volatility around the U.S. presidential election.
A year ago, CIBC saw profit at its capital markets business shoot up 52 per cent to $371-million as tumultuous stock markets boosted trading volumes and debt and equity issuance..
Alexandra Posadzki