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Dec 13, 2017

CIBC sees proportion of profits from U.S. doubling in 3 years

CIBC boss wants big gain in U.S. profit by 2020

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Canadian Imperial Bank of Commerce (CM.TO) expects the proportion of its earnings coming from the United States to nearly double in the next three years, helped by the US$5 billion acquisition of Chicago-based PrivateBancorp, it said on Wednesday.

The bank acquired PrivateBancorp in June, closing a deal that analysts saw as transformational in enabling the bank to diversify outside its domestic market, where there are concerns about a hard-landing for prices in the cooling Toronto and Vancouver housing markets.

CIBC told analysts during an investor update that it anticipated its U.S. business would contribute 17 per cent of the bank's overall earnings by 2020 compared with 9 per cent in 2017.

"That's a lot of hard work," said Chief Executive Victor Dodig. "We're going to focus on going deeper with our existing clients and bringing in new clients. The organic driver of growth is the most important driver we can focus on and the most sensible use of capital."

Larry Richman, group head of the U.S. region for CIBC and chief executive of PrivateBancorp, said the bank was targeting 10 to 12 percent annual earnings growth in the U.S. over the next three years.

The bank is focusing its international strategy on the United States where it sees opportunities to drive growth. Reuters reported on Tuesday that CIBC planned to list its US$2 billion Caribbean unit, FirstCaribbean, in New York, enabling it to exit a region where earnings growth has been slow.

"We're contemplating it," Dodig told analysts. "The franchise is performing very well. Our goal is to make sure that that business continues to perform well. Accessing a deep capital pool can be nothing but good for the business overall."

CIBC said it expected overall earnings growth of 5 to 10 per cent over the next three years and a return on equity of more than 15 percent. It also said it planned to pay out 40 to 50 per cent of its earnings in dividends to shareholders.

The bank also said it anticipates its core tier 1 ratio, a key measure of its financial strength, will increase to between 11.5 per cent and 12.5 per cent by the end of 2020, giving it one of the strongest capital buffers among Canadian lenders.