Canadian Housing Crash Of Up To 30% May Not Be That Bad For CIBC

Officials have reported that the Canadian Imperial Bank of Commerce would undergo less than $100 million in mortgage losses even in a hypothetical 30 percent decline in the nation’s home prices, in addition to an 11 percent increase in unemployment.

Laura Dottori-Attanasio, CIBC chief risk officer mentioned that their calculations recognized the possibility that the losses might include some insured mortgages.

She further stated that CIBC is unmoved by the supposedly uncurbed price growth in Canada’s high-in-demand housing markets and that bank still perceives residential mortgage as a “very good product”.

“When we look at our greater Toronto and Vancouver markets, we have better [credit] scores than the national average, lower at origination loan to values, our serious arrear rates are much lower than our overall portfolio, and so the credit quality is very high in these particular segments,” she stated.

“In fact, as we get worried about where the economy might be headed and the leveraged Canadian consumer, I think the area you want to look at more closely is in the unsecured product area.”

In an August 25th client note, John Aiken, Barclays Capital Bank analyst stated that CIBC would be able to sustain its momentum of “impressive” growth shown in the third quarter. Officials maintained that the bank enjoyed remarkable growth in its domestic lending segment in Q3, leading to $1.4 billion ($3.61 a share) in profits for that quarter, an increase from $978 million ($2.42) the same in the previous year.

“This means that the earnings outlook for CM (Canadian Imperial Bank of Commerce) is likely stronger than had been anticipated by the market heading into the quarter,” Aiken wrote.

“However, given that the bank appears to be increasing its domestic exposure at a point when more are becoming concerned about the Canadian economy, this may somewhat dampen investors’ enthusiasm.”


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