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 December, 2021

Commission File Number: 1-14678

 

 

CANADIAN IMPERIAL BANK OF COMMERCE

(Translation of registrant’s name into English)

 

 

81 Bay Street

CIBC Square

Toronto, Ontario

Canada, M5J 0E7

(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  ☒

 

 

 

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
Date: December 2, 2021				By:		/s/   Allison Mudge
				Name:		Allison Mudge
				Title:		Senior Vice-President

CIBC Annual Report 2021

    

 

Business mix (% reported net income) 2021 business mix 39% Canadian Personal and Business Banking 26% Canadian Commercial Banking and Wealth Management 14% U.S. Commercial Banking and Wealth Management 29% Capital Markets -8% Corporate and Other 2021 performance at a glance Reported revenue ($ billions) Reported earnings per share ($) Adjusted earnings per share(1) ($) Dividend ($/share) 18.6 18.7 20.0 19 20 21 11.19 8.22 13.93 19 20 21 11.92 9.69 14.47 19 20 21 5.60 5.82 5.84 19 20 21 (1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A.

Financial highlights For the year ended October 31 (Canadian $ in billions, except as noted) 2021 2020 Financial results Revenue 20.0 18.7 Provision for credit losses 0.2 2.5 Expenses 11.5 11.4 Reported/Adjusted net income(1) 6.4/6.7 3.8/4.4 Financial measures (%) Reported(2)/Adjusted efficiency ratio(1) 57.6/55.4 60.6/55.8 Reported(2)/Adjusted return on common shareholders’ equity (ROE)(1) 16.1/16.7 10.0/11.7 Net interest margin(2) 1.42 1.50 Total shareholder return 58.3 (5.9) Common share information Reported/Adjusted earnings per share(1) 13.93/14.47 8.22/9.69 Market capitalization 67.7 44.4 Dividends (%) Dividend yield 3.9 5.9 Reported(2)/Adjusted dividend payout ratio(1) 41.8/40.3 70.7/60.0 Net income by strategic business unit Canadian Personal and Business Banking(3) 2.5 1.8 Canadian Commercial Banking and Wealth Management 1.7 1.2 U.S. Commercial Banking and Wealth Management(3) 0.9 0.4 Capital Markets(3) 1.9 1.3 (1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A. (2) For additional information on the composition of these specified financial measures, see the “Glossary” section of the MD&A. (3) Certain prior period information has been revised. For additional information, see the “External reporting changes” section of the MD&A. Financial scorecard Target(1) 2021 reported results 2021 adjusted results(2) Diluted earnings per share (EPS) growth 5%–10% annually $13.93, up 69% from 2020 $14.47, up 49% from 2020 Return on equity (ROE) 15%+ 16.1% 16.7% Operating leverage(3) Positive 5.3%, an increase of 930 basis points from 2020 0.7%, an increase of 130 basis points from 2020 Basel III CET1 ratio Strong buffer to regulatory minimum 12.4% Dividend payout ratio 40%–50% 41.8% 40.3% Total shareholder return Outperform the S&P/TSX Composite Banks Index over a rolling five-year period CIBC – 91.9% Banks Index – 80.4% (1) Based on adjusted measures. Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A. (2) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A. (3) For additional information on the composition of this specified financial measure, see the “Glossary” section of the MD&A.

    

Our commitment to ESG ESG strategy Ambitions in action We’re activating our resources to create positive change for our team, our clients, our communities and our planet, contributing to a more secure, equitable and sustainable future where everyone’s ambitions are made real. We are putting our ESG commitments into action by: Building integrity and trust We act with integrity and transparency to maintain the trust that clients have placed in us. Creating access to opportunities We partner to build equitable and resilient communities where ambitions are more attainable for all. Accelerating climate action We support solutions to address climate change, to help transition to a sustainable, lower carbon future. 2021 Highlights Building integrity and trust We continue to foster CIBC’s principles-based approach and align CIBC’s Code of Conduct (Code) to reflect changing business conditions. We have enhanced our Code to reinforce the importance of information security practices, and health and safety protocols; 100% of our team members completed ethical training on our Code(1). We consistently add to the layers of security in place to protect our clients, including new technology such as digital identity verification and voice biometrics to prevent fraud. Our investment in market-leading public cloud technology will reinforce and expand critical foundations in data protection and security and enable us to support faster, real-time, data-driven decisions, to quickly launch and scale new innovations for enhanced client experience. Creating access to opportunities We remained focused on actively supporting the growth ambitions of business owners, with $4.8 billion in new loan authorizations provided to small and medium-sized enterprises(2) in 2021, including a new banking program designed for Black-owned businesses that provides solutions, advice and resources tailored to their unique banking needs and includes access to expert advice through our Black Entrepreneurship Specialists team. Over 200,000 clients participated in our financial education seminars offered at no cost, over the past three years, helping them better understand options to secure their financial future with a focus on the unique needs of women, members of the LGBTQ+ community and Indigenous peoples. We are committed to engage 250,000 clients in financial education seminars and events over the next three years (2022–2024). Following the end of our fiscal year we announced the CIBC Foundation which will serve our commitment to create a more equitable society and help make ambitions real for communities. CIBC has made donations totalling $70 million in 2021 to launch the Foundation, with plans to grow to $155 million over time. Accelerating climate action In 2021, we announced our ambition to achieve net-zero greenhouse gas (GHG) emissions from our operations and financing activities by 2050. As part of this goal and as a leader in financing renewable energy initiatives, we also doubled our commitment to mobilizing sustainable finance to a target of $300 billion by 2030(3) as we play a role in accelerating the transition to a lower-carbon economy. In addition, we joined sustainability-focused industry partnerships, advisory bodies and research groups to contribute to market-led and public policy solutions to facilitate the transition to a low-carbon economy. In 2021, these included the Net-Zero Banking Alliance to collaborate on a global effort to combat climate change, the Partnership for Carbon Accounting Financials, an initiative developed by the financial industry to create a global standard to measure and disclose GHG emissions on loans and investments, as well as Canada’s Sustainable Finance Action Council, the Institute for Sustainable Finance, the Rocky Mountain Institute’s Center for Climate-Aligned Finance and Climate Engagement Canada. As strong believers in the value of commercially viable sustainability solutions, we joined with global banks to launch Project Carbon aimed at bringing liquidity and transparency to the carbon credit market, better enabling clients to achieve their net-zero targets. (1) Excludes the U.S. Commercial Banking and Wealth Management strategic business unit and FirstCaribbean International Bank Limited. (2) Small-sized enterprises are typically companies with revenue of less than $5 million and medium-sized enterprises are typically companies with revenue of more than $5 million but less than $20 million. (3) Sustainable financing largely relates to client activities that support, but are not limited to, renewable and emission-free energy, energy efficiency, sustainable infrastructure, affordable housing, green buildings, sustainability-linked financings and green financial products. The products offered by CIBC included in our mobilization commitment to support these client activities include loans and loan syndications, debt and equity underwritings, M&A advisory and hedging solutions, as well as principal investments. CIBC 2021 ANNUAL REPORT i

    

 

Our commitment to ESG 2021 ESG performance highlights In 2021, we built on our long-standing commitment to ESG as a cornerstone of how we operate and create value for our stakeholders. 10 Top 10 in financing for the renewable energy industry across North America(1) $4.8B in new loan authorizations to small and medium-sized enterprises (Canada)(2) 38% women in board-approved executive roles (Global) 89% Our employee engagement score exceeded the Willis Towers Watson Global Financial Services Norm(3) $132.7M invested in community organizations across Canada and the U.S.(4) 23% visible minorities in board-approved executive roles (Canada) Ranked A- among the top-tier of global banks for climate actions by CDP 100% of employees completed CIBC ethical training on our Code of Conduct(5) Underwriting bank and coordinating lead arranger for the Western Spirit Wind power projects, sponsored by Pattern Energy, the largest single-phase renewable power build out in U.S. history (1) North American Renewables League Tables by Inframation. (2) New loan authorizations in 2021 to small and medium-sized enterprises were comprised of $0.8 billion to small-sized enterprises and $4.0 billion to medium-sized enterprises. (3) Based on participation in our annual employee survey. Excludes FirstCaribbean International Bank Limited. (4) Includes corporate giving, including $70 million to CIBC Foundation, corporate sponsorships and employee giving and fundraising. (5) Excludes the U.S. Commercial Banking and Wealth Management strategic business unit and FirstCaribbean International Bank Limited. ii CIBC 2021 ANNUAL REPORT

 

    

Our commitment to ESG Client experience Our clients are important stakeholders in our bank. Helping to make their ambitions a reality is our shared purpose, and requires an investment in our team to ensure they have the tools and technology to help our clients plan for the future and achieve their goals. In 2021, our clients felt our commitment more than ever, as we demonstrated genuine care through the ongoing pandemic. Our team acted with integrity, transparency and agility to ensure our clients felt confident in trusting us with their banking during uncertain times. Our bank delivered the best year-over-year performance among its peers in our Net Promoter Score measured by the Ipsos Customer Satisfaction Index study. Our internal CIBC Enterprise Net Promoter Score (CX NPS) is a balanced weighting of internal net promoter scores from across our businesses. As of October 31, 2021, the CX NPS was 62.6. This represents a marginal (0.2 point) decrease from 2020 due to the inclusion of survey programs that were added to better reflect our clients’ experience across CIBC. We delivered further digital enhancements to our clients, enabling clients to stay connected to their finances and leverage insights into their spending to help keep their ambitions on track. Our clients now have access to innovative enhancements and value-added digital services like CIBC Insights, Virtual Assistant, and Digital Identity Verification for our Mobile Banking® App, which was ranked #1 in overall customer satisfaction by J.D. Power for the second year in a row. Financial planning and advice remains a core focus. Increasingly, clients are looking to the future and refocusing on their long-term ambitions. Tools like CIBC GoalPlanner™, a digitally enabled goal-setting platform, allow our Imperial Service advisors to better understand our clients’ ambitions, which has led to significantly higher client satisfaction among those clients who used the platform with their financial advisor. In an increasingly digital world, trust is essential. We continued to proactively invest in our cybersecurity defences and risk management practices to protect our clients’ data and ensure secure banking experiences. Our purpose-driven culture is reflected in feedback from our clients IVIVI HELLO TORONTO! “Louis and Johnny from CIBC have been extremely attentive to my needs as I’ve pursued my goal of opening this practice. During challenging economic times, they were willing to listen to my story. They believe in what I’m doing for my community.” Dr. Jason Adinata 416 Dentistry “Things happened that I didn’t see coming, and I got into debt. CIBC called me and offered guidance and help. I started to dig myself out of this hole — and now I have savings. I turned my life around.” Maya Cabello “It means a lot to help communities devastated by storms. We feel a sense of responsibility, knowing that our business supports livelihoods in our own community. As our business has grown and our financial needs have gotten more complex, it’s great knowing CIBC is on our team.” Tim Noble and Barrie Hall T&T Line Construction CIBC 2021 ANNUAL REPORT iii

    

 

Message from the President and Chief Executive Officer “Our CIBC Team will be the catalyst for accelerated growth as we carry our momentum into the years ahead. As we do, what will unite us every day is our purpose — to help make our clients’ ambitions a reality.“ Victor G. Dodig President and Chief Executive Officer In a year marked by the ongoing COVID-19 pandemic and resulting economic uncertainty, and vital conversations about inclusion and climate change, our CIBC team of 45,000-strong stepped up once again to provide leadership for our stakeholders. Our bank was there for our clients and for our communities in 2021. We invested in the tools available to our advisory team to help make our clients’ ambitions a reality. We joined the Net-Zero Banking Alliance, and furthered our commitment to sustainable financing for innovative solutions that enable clients to meet their own sustainability goals. And just after year end, we announced the launch of our new charitable foundation that will help build social and economic equality for underserved communities. We also delivered for shareholders, with strong growth driven by our execution against the priorities of our client-focused strategy, and fuelled by the investments we’ve made in our culture and our capabilities. Having established clear momentum in our business, we set out as a team to write the next chapter in the history of our bank, as we officially launched our new brand near the end of the year. Our new look connects our proud past to the present and the future, and is a symbol of our purpose. Our accomplishments this year and our ambitions for the future are made possible by our tremendous team across North America and around the world. Their professionalism and dedication are the foundation for everything we have accomplished. Our CIBC Team will be the catalyst for accelerated growth as we carry our momentum into the years ahead. As we do, what will unite us every day is our purpose — to help make our clients’ ambitions a reality. Business performance Our bank reported earnings in 2021 of $6.4 billion or $6.7 billion on an adjusted basis(1), up 70% and 50% from last year, respectively. These results were delivered through strong top-line performance driven by market share gains achieved by attracting new clients and deepening existing relationships across our bank. Our capital position remained very strong, with a CET1 ratio of 12.4%, underscoring the strength of our bank. In 2021, we established three clear priorities to grow our business. The first was to rejuvenate our Canadian consumer franchise, the second was to maintain and grow our resilient North American Commercial Banking, Wealth Management, and Capital Markets businesses, and the third was to accelerate our ongoing investments in growth initiatives into the future. (1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A. iv CIBC 2021 ANNUAL REPORT

Rejuvenating our Canadian consumer franchise In Canadian Personal and Business Banking, we established clear growth momentum thanks to our efforts to revitalize and strengthen this business, and we are pleased with our market share gains on both sides of the balance sheet. In 2021, we launched CIBC GoalPlannerTM, a digitally enabled goal-setting platform, allowing our Imperial Service advisors to better understand our clients’ ambitions. To date, over 224,000 clients have used the platform, generating positive feedback and resulting in deeper relationships as clients take advantage of the intuitive and interactive features of the platform to set goals and stay connected to their progress over time. Whether clients have experienced challenges resulting from the pandemic or are on strong footing and focused on growth, our team was there to help with personal advice enabled by digital tools. Our mortgage growth accelerated this year as we helped more Canadians achieve their ambition of home ownership through our national team of mortgage advisors and our banking centre teams. We delivered record net flows in our mutual fund business, reflecting our ability to help clients make progress on their long-term ambitions despite near-term challenges presented by the pandemic. We made significant progress in delivering a modern experience for our clients, as reflected in our client experience scores which are our best on record. And, we continued to lead the market in digital innovation for clients, winning the J.D. Power award for best mobile banking app among the major Canadian banks for a second consecutive year. We continue to look to the future as we invest in the growth of our Direct Financial Services business, which includes Simplii Financial and our Investor’s Edge self-directed brokerage. This business meets the needs of digital-savvy clients who prefer self-service options to deposit, move, and invest their money. We delivered double-digit revenue growth in this business through a continued focus on innovation and delivering fintech-like services to a growing client base. We made significant progress in delivering a modern experience for our clients, as reflected in our client experience scores which are our best on record. Revenue by Business Segment $8.15B Canadian Personal and Business Banking $4.67B Canadian Commercial Banking and Wealth Management $2.19B U.S. Commercial Banking and Wealth Management $4.52B Capital Markets Victor Dodig with NatWest Group Chief Executive Officer, Alison Rose, at the 2021 CIBC Sustainability Conference. CIBC 2021 ANNUAL REPORT v

Message from the President and Chief Executive Officer Our new brand is not a promise of something that we’re going to be — it’s a statement on the bank we’ve worked hard to become. The brand message of Ambitions made real is brought to life by the investments we’ve made across our bank. Maintaining and growing our resilient North American Commercial Banking, Wealth Management, and Capital Markets businesses The private economy recovered in 2021, on both sides of the border. While the pandemic continues to impact a number of industries, many commercial banking clients saw a much-improved year and have clear plans for growth over the medium and long term. Our bank continued to be there for clients experiencing challenges, but increasingly our conversations with clients were about the future — particularly in our growing Innovation Banking business. In Wealth Management, our business benefitted from strong collaboration with all areas of our bank, as referral momentum continued and we established more new client relationships for the long term. Our Capital Markets business continued to perform well by delivering for our clients, collaborating on growth opportunities across our bank, and furthering our growth in the U.S. market. Our continued focus on client relationships positioned us very well in a year with robust investment banking activity and strong trading volumes. Investing in growth initiatives for the future Right across our team, we believe strongly in the bank we’re building, and in one another. Despite the challenges and uncertainty in the economy as a result of the pandemic, we’ve remained steadfast in our commitment to investing for the future. As one example, we made a strategic investment in Loop Capital, a Chicago-headquartered financial services firm with deep relationships across the U.S. This investment furthers our ability to meet the needs of clients across strategic industries on both sides of the border, and is aligned with our approach to working with firms that share our client-focused culture and a commitment to inclusive economic growth. In Canada, we announced a new long-term agreement to become the exclusive issuer of Costco Mastercards, including the acquisition of the existing portfolio which serves millions of Canadians and has over $3 billion in outstanding balances. This will significantly grow and diversify our credit card portfolio in the everyday rewards category. Importantly, this agreement with Costco provides an opportunity to deepen relationships with new clients from across Costco’s large and growing member base, making this a strategically important investment for the coming years. We also established a strategic relationship with Microsoft, embracing a cloud-first approach and enhancing our resilience, efficiency and agility. We’ve made significant progress in modernizing our bank, and this agreement will accelerate those efforts. Writing a new chapter in our history with our new brand Through our investments in culture and our capabilities, we’ve become a different bank. In 2021, we set out on the next chapter in the growth story of CIBC as we unveiled our new brand. Our new brand is not a promise of something that we’re going to be — it’s a statement on the bank we’ve worked hard to become. The brand message of Ambitions made real is brought to life by the investments we’ve made across our bank. We are now a truly North American bank. The CIBC of today is one where our team collaborates across business lines and across borders for our clients, and one where we’re all guided by our purpose. Our new brand captures the significant growth and transformation of our bank in recent years, and signifies the next phase of growth in our long history. vi CIBC 2021 ANNUAL REPORT

Furthering our commitment to an inclusive, sustainable future We are focused on the future and recognize climate change is one of the greatest threats facing society. We continue to take real action to enable a lower carbon future for our stakeholders, including announcing our ambition to achieve net-zero GHG emissions from our operations and our financing activities by 2050. We also doubled our commitment to sustainable finance — increasing our target to $300 billion dollars by 2030(2), a significant contribution to making the sustainability ambitions of our clients a reality. And we joined the Net-Zero Banking Alliance, reinforcing the role our bank plays in financing the climate transition and giving us an opportunity to work alongside global peers to map out an inclusive path to combat climate change. Importantly, we are also taking action to deliver market-based solutions, enabling our clients to achieve their net-zero GHG ambitions. One example is Project Carbon, a new platform launched by CIBC in a joint effort with three other global banks, bringing clear and consistent pricing and standards to the voluntary carbon market. Simply put, it makes the carbon credit market more liquid and more accessible, which will make it easier for clients to make progress towards their net-zero commitments. We have also made progress against our commitment to make inclusion the cornerstone of our bank’s culture. We have established measurable goals that make our leaders accountable for helping to remove barriers experienced by members of the Black community, Indigenous peoples and other communities who continue to be underrepresented in financial services. I am also proud to serve for the second year as co-chair of the BlackNorth Initiative which catalyzes leaders across Corporate Canada to end anti-Black systemic racism. In 2021, CIBC has increased the representation of board-approved executives from the Black community from 2.6% to 2.9% and the representation of our Canadian workforce increased from 3.5% to 3.8%. We were named the leading company in Canada for gender equality and ranked 19th globally in Equileap’s fourth annual Gender Equality Global Report & Ranking, reflecting our long-term commitment to creating a workplace where all our team members can achieve their ambitions. Our bank also celebrated our 10th year as one of Canada’s Top 100 Employers, and we were also named a Top Employer for Young People as a result of our ability to attract and retain top talent. Investing in our communities As 2021 drew to a close, we readied for the launch of the CIBC Foundation, an important step in our ongoing efforts to support our communities. Created to help advance social and economic equality for underserved communities, the CIBC Foundation came into being just after year end. It builds on our bank’s charitable efforts to drive lasting change so that everyone can realize their ambitions. (2) Sustainable financing largely relates to client activities that support, but are not limited to, renewable and emission-free energy, energy efficiency, sustainable infrastructure, affordable housing, green buildings, sustainability-linked financings and green financial products. The products offered by CIBC included in our mobilization commitment to support these client activities include loans and loan syndications, debt and equity underwritings, M&A advisory and hedging solutions, as well as principal investments. ESG by the numbers Women on the Board of Directors 50% Clients engaged in financial education seminars and events 72,000 Total corporate and employee giving in 2021 $132.7M(3) New loan authorizations to small and medium-sized enterprises in 2021 $4.8B (3) Includes corporate giving, including $70 million to CIBC Foundation, corporate sponsorships and employee giving and fundraising. CIBC 2021 ANNUAL REPORT vii

Message from the President and Chief Executive Officer Our flagship fundraising events such as the CIBC Run for the Cure and CIBC Miracle Day will continue to be vital elements in how we give back and support our communities. We held these events virtually again this year and raised $7.6 million combined to go towards important causes in our communities related to cancer research and supporting a brighter future for children. Closing Our bank weathered the onset of the pandemic in 2020 thanks to an unrelenting focus on our clients. We advanced our growth strategy and worked to live our purpose in 2021 through our continued investments in initiatives that make a difference to our clients, team, communities and investors. We enter 2022 with a new brand, and a sense of anticipation. That commitment is reflected in our financial results and underpins our investments for the future — in our bank’s growth potential as well as in our communities as we strive to foster a more inclusive, sustainable economy. In reflecting on such an important year for our bank, I want to close by saying thank you to our incredible team. They are the face of our bank and they live our purpose every day. They have remained steadfast through a challenging time, and they are very much the driving force behind the bank we’ve become. The future is bright — for our stakeholders and for our bank. The next chapter in our bank’s history begins now, and we’re excited about what we can accomplish together. Victor G. Dodig President and Chief Executive Officer Executive Team 1 2 3 4 5 6 7 8 9 10 (from left to right, top to bottom): 1 – Victor G. Dodig President and Chief Executive Officer 2 – Shawn Beber Senior Executive Vice-President and Chief Risk Officer 3 – Michael G. Capatides Senior Executive Vice-President and Group Head, U.S. Region; President and CEO, CIBC Bank USA 4 – Harry Culham Senior Executive Vice-President and Group Head, Capital Markets and Direct Financial Services 5 – Laura Dottori-Attanasio Senior Executive Vice-President and Group Head, Personal and Business Banking, Canada 6 – Jon Hountalas Senior Executive Vice-President and Group Head, Commercial Banking and Wealth Management, Canada 7 – Christina Kramer Senior Executive Vice-President and Group Head, Technology, Infrastructure and Innovation 8 – Kikelomo Lawal Executive Vice-President and Chief Legal Officer 9 – Hratch Panossian Senior Executive Vice-President and Chief Financial Officer and Enterprise Strategy 10 – Sandy Sharman Senior Executive Vice-President and Group Head, People, Culture and Brand viii CIBC 2021 ANNUAL REPORT

    

 

Message from the Chair of the Board “Looking back on 2021, my first year as Chair of the Board, I am proud of how CIBC has supported clients, communities and team members through the second year of the COVID-19 pandemic.” Katharine B. Stevenson Chair of the Board Our top priorities are to ensure CIBC has the right strategy, the best talent and excellent risk management to pursue opportunities aligned with our purpose. CIBC’s growth agenda is on track as our clients across industries emerge from the pandemic, and as confidence in the future rises for individuals and businesses alike. During 2021, all our businesses performed well and we delivered strong shareholder returns while continuing to invest in both our U.S. and Canadian franchises. Your Board has a relentless focus on environmental, social and governance matters. We are committed to making inclusion a cornerstone of CIBC’s culture and I am pleased to report that 40% of CIBC’s Executive Committee are women, and the Board is at gender parity with 50% women. In addition, your Board includes one director who identifies as a member of the Black community and one who identifies as a member of the LGBTQ+ community. We believe climate change is one of the most important issues of our time. We are actively reducing our own carbon footprint; however, our biggest impact will be by proactively supporting our clients in their transition to a lower carbon economy. Towards this end, we have announced our ambition to achieve net-zero greenhouse gas emissions by 2050 and have doubled our target for sustainable financing, among other environmental commitments. As we look ahead to 2022 we are optimistic. Despite the challenges of the last two years, CIBC has accelerated its investments in growth initiatives which support our client-focused strategy. This positions us well for future growth. Finally, I would like to recognize your CEO, Victor Dodig, and your management team for their leadership in guiding us through the second year of the pandemic while delivering strong financial performance. On behalf of your Board, I also would like to thank every member of CIBC’s team. We appreciate your dedication in living our purpose each and every day for our clients. Katharine B. Stevenson Chair of the Board
CIBC 2021 ANNUAL REPORT ix

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 management’s discussion and analysis, consolidated financial statements, 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.

 

Topics		Recommendations				Disclosures		Management’s discussion and analysis		Consolidated financial statements				Pillar 3 Report and Supplementary regulatory capital  disclosure
								Page references
General			1			Index of risk information – current page
			2			Risk terminology and measures (1)									71–73
			3			Top and emerging risks		50
			4			Key future regulatory ratio requirements		36, 39, 74, 75			172				9, 16
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		48, 53
			8			Bank-wide stress testing		32, 49, 57, 63, 70, 72
Capital adequacy and risk-weighted assets			9			Minimum capital requirements		32			172
			10			Components of capital and reconciliation to the consolidated regulatory balance sheet		36							8–11
			11			Regulatory capital flow statement		37							12
			12			Capital management and planning		39			172
			13			Business activities and risk-weighted assets		38, 53							4
			14			Risk-weighted assets and capital requirements		34, 38							4
			15			Credit risk by major portfolios		56–60							27–36
			16			Risk-weighted assets flow statement		38							4, 5
			17			Back-testing of models		48, 57, 68							69, 70
Liquidity			18			Liquid assets		73
Funding			19			Encumbered assets		73
			20			Contractual maturity of assets, liabilities and off-balance sheet instruments		78
			21			Funding strategy and sources		76
Market risk			22			Reconciliation of trading and non-trading portfolios to the consolidated balance sheet		67
			23			Significant trading and non-trading market risk factors		67–71
			24			Model assumptions, limitations and validation procedures		67–71
			25			Stress testing and scenario analysis		32, 70
Credit risk			26			Analysis of credit risk exposures		58–65			145–152, 193				6–7, 65–68
			27			Impaired loan and forbearance policies		55, 63, 85			124
			28			Reconciliation of impaired loans and the allowance for credit losses		63			146
			29			Counterparty credit risk arising from derivatives		55, 59			162–163				68, 35 (2)
			30			Credit risk mitigation		55			162–163				20, 27–36, 39–40, 46–50, 53, 68
Other risks			31			Other risks		79–82
			32			Discussion of publicly known risk events		79			185

 

(1)	A detailed glossary of our risk and capital terminology is included on page 103.

(2)	Included in supplementary financial information package.

 

x		CIBC 2021 ANNUAL REPORT

Management’s discussion and analysis

 

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 year ended October 31, 2021, compared with prior years. The MD&A should be read in conjunction with the audited consolidated financial statements. 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 consolidated financial statements. The MD&A is current as of December 1, 2021. Additional information relating to CIBC, including the Annual Information Form, is available on SEDAR at www.sedar.com and on the United States (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 in the MD&A and the audited consolidated financial statements is provided on pages 100 to 106 of this Annual Report.

 

 

 

 

 

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 Annual 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 “Message from the President and Chief Executive Officer”, “Overview – Performance against objectives”, “Economic and market environment – Outlook for calendar year 2022”, “Significant events”, “Financial performance overview – Taxes”, “Strategic business units overview – Canadian Personal and Business Banking”, “Strategic business units overview – Canadian Commercial Banking and Wealth Management”, “Strategic business units overview – U.S. Commercial Banking and Wealth Management”, “Strategic business units overview – Capital Markets”, “Financial condition – Capital management”, “Financial condition – Off-balance sheet arrangements”, “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”, “Accounting and control matters – Other regulatory developments” and “Accounting and control matters – Controls and procedures” 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 2022 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 “Economic and market environment – Outlook for calendar year 2022” 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, 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, climate change and other environmental and social 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 2021 ANNUAL REPORT			1

Management’s discussion and analysis

 

External reporting changes

The following external reporting changes were made in 2021.

Changes made to our business segments

•

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.

Overview

CIBC is a leading North American financial institution committed to creating enduring value for all our stakeholders – our clients, team, communities and shareholders. We are guided by our purpose – to help make your ambitions a reality, and our focus on creating a more secure, equitable and sustainable future through our environmental, social and governance (ESG) principles.

Across Personal and Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, our 45,000 employees provide a full range of financial products and services to 11 million personal banking, business, public sector and institutional clients in Canada, the U.S. and around the world.

 

 

Our strategy

In 2021, we continued to focus on building a modern, relationship-oriented bank. Through these efforts, we’re delivering superior client experience and top-tier shareholder returns while maintaining our financial strength, risk discipline and advancing our purpose-driven culture. Foundational to our progress is a consistent focus on three strategic priorities:

•

Further strengthening our Canadian consumer franchise;

•

Maintaining and growing our resilient North American Commercial Banking, Wealth Management, and Capital Markets businesses; and

•

Accelerating ongoing investments in growth initiatives.

Performance against objectives

CIBC reports a scorecard of financial measures that we use to evaluate and report on our progress to external stakeholders. These measures can be categorized into four key areas – earnings growth, operating leverage, profitability, and balance sheet strength. We have set targets for each of these measures over the medium term, which we define as three to five years, assuming a normal business environment and credit cycle. Our ability to achieve these objectives may be adversely affected by extraordinary developments and disruptions.

Global economic activity accelerated this year, although the COVID-19 pandemic continues to pose a headwind to the pace of that recovery. Distribution of COVID-19 vaccines has allowed for the re-opening of much of the economy, but not all economic activities have returned to pre-pandemic levels and continue to have an impact on our ability to achieve certain performance objectives.

 

Earnings growth To assess our earnings growth, we monitor our earnings per share (EPS). Our target of 5% to 10% growth reflects a simple average of annual adjusted(1) EPS growth. In 2021, against a backdrop of an improving economic environment, year-over-year reported and adjusted(1) diluted EPS increased by 69% and 49%, respectively.   Going forward, we are maintaining our target to deliver average annual adjusted(1) EPS growth of 5% to 10%.		Reported diluted EPS ($)		Adjusted diluted EPS(1) ($)

 

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

 

2		CIBC 2021 ANNUAL REPORT

Management’s discussion and analysis

 

Operating leverage Operating leverage, defined as the difference between the year-over-year percentage change in revenue and year-over-year percentage change in non-interest expenses, is a measure of the relative growth rates of revenue and expenses. In 2021, our reported and adjusted(1) operating leverage was 5.3% and 0.7%, respectively, compared with (4.0)% and (0.6)%, respectively in 2020.   Going forward, our target is to deliver positive adjusted(1) operating leverage.		Reported operating leverage (%)		Adjusted operating leverage(1) (%)
Profitability We have three metrics to measure profitability, including two shareholder value targets:   1.  Return on common shareholders’ equity (ROE)   ROE, defined as the ratio of net income to average(2) common shareholders’ equity, is a key measure of profitability. In 2021, our reported and adjusted(1) ROE were at 16.1% and 16.7%, respectively, compared with 10.0% and 11.7%, respectively, in 2020.   Going forward, we will continue to target a strong adjusted(1) ROE of at least 15%.		Reported return on common shareholders’ equity (%)		Adjusted return on common shareholders’ equity(1) (%)
2.  Dividend payout ratio   Dividend payout ratio is defined as the ratio of common share dividends paid as a percentage of net income after preferred share dividends, premium on preferred share redemptions, and distributions on other equity instruments. Our key criteria for considering dividend increases are our current level of payout relative to our target and our view on the sustainability of our current earnings level. In 2021, our reported and adjusted(1) dividend payout ratios were 41.8% and 40.3%, respectively, compared with 70.7% and 60.0%, respectively, in 2020. In response to the COVID-19 pandemic, effective March 2020, the Office of the Superintendent of Financial Institutions (OSFI) directed that all federally regulated financial institutions halt share buybacks and dividend increases until further notice. The temporary measure was lifted effective November 4, 2021.   Going forward, we will continue to target an adjusted(1) dividend payout ratio of 40% to 50%.		Reported dividend payout ratio (%)		Adjusted dividend payout ratio(1) (%)

 

3.  Total shareholder return (TSR)   TSR is the ultimate measure of shareholder value, and the output of delivering against the financial targets within our control. We have an objective to deliver a TSR that exceeds the industry average, which we have defined as the Standard & Poor’s (S&P)/Toronto Stock Exchange (TSX) Composite Banks Index, over a rolling five-year period. For the five years ended October 31, 2021, our TSR was 91.9% (2020: 27.7%), which was above the S&P/TSX Composite Banks Index return over the same period of 80.4%.		Rolling five-year TSR (%)

 

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

(2)	Average balances are calculated as a weighted average of daily closing balances.

 

CIBC 2021 ANNUAL REPORT			3

Management’s discussion and analysis

 

Balance sheet strength Maintaining a strong balance sheet is foundational to our long-term success. Our goal is to maintain strong capital and liquidity positions. We look to constantly balance our objectives of holding a prudent amount of excess capital for unexpected events and environmental uncertainties, investing in our core businesses, growing through acquisitions and returning capital to our shareholders.   1.  Basel III Common Equity Tier 1 (CET1) ratio   For the year ended October 31, 2021, our Basel III CET1(1) ratio was 12.4%, compared with 12.1% in 2020, well above the current regulatory target set by OSFI of 10.5%.   In response to the COVID-19 pandemic, effective March 2020, OSFI directed that all federally regulated financial institutions halt share buybacks and dividend increases until further notice. The temporary measure was lifted effective November 4, 2021.   2.  Liquidity coverage ratio (LCR)   Our ability to meet our financial obligations is measured through the LCR ratio. It measures unencumbered high-quality liquid assets (HQLA) that can be converted into cash to meet liquidity needs for a 30-calendar-day liquidity stress scenario. The LCR standard requires that, absent a situation of financial stress, the value of the ratio be no lower than 100%.   For the quarter ended October 31, 2021, our three-month daily average LCR(1) was 127% compared to 145% for the same period last year. The decrease returns our LCR to pre-pandemic levels.		CET1 ratio (%)     Liquidity coverage ratio (%)

 

(1)	CET1 is calculated pursuant to OSFI’s Capital Adequacy Requirements (CAR) Guideline and LCR is calculated pursuant to OSFI’s Liquidity Adequacy Requirements (LAR) Guideline, which are both based on Basel Committee on Banking Supervision (BCBS) standards.

 

4		CIBC 2021 ANNUAL REPORT

Management’s discussion and analysis

 

Financial highlights

 

As at or for the year ended October 31				2021				2020				2019				2018				2017
Financial results ($ millions)
Net interest income				$	11,459			$	11,044			$	10,551			$	10,065			$	8,977
Non-interest income					8,556				7,697				8,060				7,769				7,303
Total revenue					20,015				18,741				18,611				17,834				16,280
Provision for credit losses					158				2,489				1,286				870				829
Non-interest expenses					11,535				11,362				10,856				10,258				9,571
Income before income taxes					8,322				4,890				6,469				6,706				5,880
Income taxes					1,876				1,098				1,348				1,422				1,162
Net income				$	6,446			$	3,792			$	5,121			$	5,284			$	4,718
Net income attributable to non-controlling interests					17				2				25				17				19
Preferred shareholders and other equity instrument holders					158				122				111				89				52
Common shareholders					6,271				3,668				4,985				5,178				4,647
Net income attributable to equity shareholders				$	6,429			$	3,790			$	5,096			$	5,267			$	4,699
Financial measures
Reported efficiency ratio (1)					57.6	%			60.6	%			58.3	%			57.5	%			58.8	%
Reported operating leverage (1)					5.3	%			(4.0	)%			(1.5	)%			2.4	%			1.6	%
Loan loss ratio (2)					0.16	%			0.26	%			0.29	%			0.26	%			0.25	%
Reported return on common shareholders’ equity (1)					16.1	%			10.0	%			14.5	%			16.6	%			18.3	%
Net interest margin (1)					1.42	%			1.50	%			1.65	%			1.68	%			1.66	%
Net interest margin on average interest-earning assets (3)(4)					1.59	%			1.69	%			1.84	%			1.88	%			1.85	%
Return on average assets (4)(5)					0.80	%			0.52	%			0.80	%			0.88	%			0.87	%
Return on average interest-earning assets (3)(4)(5)					0.89	%			0.58	%			0.89	%			0.99	%			0.97	%
Reported effective tax rate					22.5	%			22.5	%			20.8	%			21.2	%			19.8	%
Common share information
Per share ($)		– basic earnings		$	13.97			$	8.23			$	11.22			$	11.69			$	11.26
		– reported diluted earnings			13.93				8.22				11.19				11.65				11.24
		– dividends			5.84				5.82				5.60				5.32				5.08
		– book value (6)			91.66				84.05				79.87				73.83				66.55
Closing share price ($)					150.17				99.38				112.31				113.68				113.56
Shares outstanding (thousands)		– weighted-average basic			448,953				445,435				444,324				443,082				412,636
		– weighted-average diluted			450,183				446,021				445,457				444,627				413,563
		– end of period			450,828				447,085				445,342				442,826				439,313
Market capitalization ($ millions)				$	67,701			$	44,431			$	50,016			$	50,341			$	49,888
Value measures
Total shareholder return					58.03	%			(5.90	)%			4.19	%			4.70	%			18.30	%
Dividend yield (based on closing share price)					3.9	%			5.9	%			5.0	%			4.7	%			4.5	%
Reported dividend payout ratio (1)					41.8	%			70.7	%			49.9	%			45.5	%			45.6	%
Market value to book value ratio					1.64				1.18				1.41				1.54				1.71
Selected financial measures – adjusted (7)
Adjusted efficiency ratio (8)					55.4	%			55.8	%			55.5	%			55.6	%			57.2	%
Adjusted operating leverage (8)					0.7	%			(0.6	)%			0.2	%			3.2	%			1.6	%
Adjusted return on common shareholders’ equity					16.7	%			11.7	%			15.4	%			17.4	%			18.1	%
Adjusted effective tax rate					22.7	%			21.8	%			20.6	%			20.0	%			20.3	%
Adjusted diluted earnings per share ($)				$	14.47			$	9.69			$	11.92			$	12.21			$	11.11
Adjusted dividend payout ratio					40.3	%			60.0	%			46.9	%			43.4	%			46.2	%
On- and off-balance sheet information ($ millions)
Cash, deposits with banks and securities				$	218,398			$	211,564			$	138,669			$	119,355			$	107,571
Loans and acceptances, net of allowance for credit losses					462,879				416,388				398,108				381,661				365,558
Total assets					837,683				769,551				651,604				597,099				565,264
Deposits					621,158				570,740				485,712				461,015				439,706
Common shareholders’ equity (1)					41,323				37,579				35,569				32,693				29,238
Average assets (4)					809,621				735,492				639,716				598,441				542,365
Average interest-earning assets (3)(4)					721,686				654,142				572,677				536,059				485,837
Average common shareholders’ equity (1)(4)					38,881				36,792				34,467				31,184				25,393
Assets under administration (AUA) (1)(9)(10)(11)					2,963,221				2,364,005	(8)			2,423,240	(8)			2,303,962				2,192,947
Assets under management (AUM) (1)(10)(11)					316,834				261,037	(8)			249,596	(8)			225,379				221,571
Balance sheet quality (All-in basis) and liquidity measures (12)
Risk-weighted assets (RWA) ($ millions)
Total RWA				$	272,814			$	254,871			$	239,863				n/a				n/a
CET1 capital RWA					n/a				n/a				n/a			$	216,144			$	203,321
Tier 1 capital RWA					n/a				n/a				n/a				216,303				203,321
Total capital RWA					n/a				n/a				n/a				216,462				203,321
Capital ratios
CET1 ratio (13)					12.4	%			12.1	%			11.6	%			11.4	%			10.6	%
Tier 1 capital ratio (13)					14.1	%			13.6	%			12.9	%			12.9	%			12.1	%
Total capital ratio (13)					16.2	%			16.1	%			15.0	%			14.9	%			13.8	%
Leverage ratio					4.7	%			4.7	%			4.3	%			4.3	%			4.0	%
LCR (14)					127	%			145	%			125	%			128	%			120	%
Other information
Full-time equivalent employees					45,282				43,853				45,157				44,220				44,928

 

(1)	For additional information on the composition, see the “Glossary” section.

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

(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 allowance for credit losses, and certain sublease-related assets.

(4)	Average balances are calculated as a weighted average of daily closing balances.

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

(6)	Common shareholders’ equity divided by the number of common shares issued and outstanding at end of period.

(7)

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.

(8)	Calculated on a taxable equivalent basis (TEB).

(9)	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 $2,341.1 billion as at October 31, 2021 (2020: $1,861.5 billion).

(10)	AUM amounts are included in the amounts reported under AUA.

(11)	Certain prior year information has been restated.

(12)

RWA and our capital ratios are calculated pursuant to OSFI’s CAR Guideline, the leverage ratio is calculated pursuant to OSFI’s Leverage Requirements Guideline, and LCR is calculated pursuant to OSFI’s LAR Guideline, all of which are based on BCBS standards. For additional information, see the “Capital management” and “Liquidity risk” sections.

(13)	Effective beginning in the second quarter of 2020, ratios reflect the expected credit loss (ECL) transitional arrangement announced by OSFI on March 27, 2020 in response to the onset of the COVID-19 pandemic.

(14)	Average for the three months ended October 31 for each respective year.

n/a	Not applicable.

 

CIBC 2021 ANNUAL REPORT			5

Management’s discussion and analysis

 

Economic and market environment

Year in review – 2021

Progress towards containing outbreaks of the COVID-19 pandemic through vaccination campaigns and less restrictive public health measures provided an improving economic backdrop for CIBC. The move from broad economic closures to lighter control measures enabled a partial recovery in service sector activity, with spending supported by job growth, fiscal measures that had elevated savings in the prior year, and ongoing monetary stimulus that kept interest rates at low levels. Some goods sector industries remained disrupted by global supply chain bottlenecks caused by the pandemic. Job gains, growing business output and rising resource prices offset diminished usage of government support measures, resulting in an improvement in business and household credit quality, although continued low interest rates held down lending margins in Canada and the U.S. Improved consumer spending had a positive impact on retail transactions volumes relative to the lows of the pandemic in 2020, but spending has not returned to pre-pandemic levels partly as a result of supply chain issues and consumer credit usage remained sluggish as households drew on ample savings. Healthy growth in mortgage demand was driven by an active housing market and higher average prices. Business credit demand picked up as firms responded to improving opportunities, while capital markets activity was supported by strong corporate and government bond issuance, mergers tied to consolidations, and constructive equity markets in both the U.S. and Canada. Deposit growth continued to decelerate after outsized gains early in the pandemic.

Outlook for calendar year 2022

Global economic activity accelerated this year, although the COVID-19 pandemic, fueled by the more contagious Delta and Omicron variants, continues to pose a headwind to the pace of that recovery, impacting services demand and the supply of goods. Restrictions imposed by governments around the world to limit the impact of the infection have eased significantly in most jurisdictions, but disruptions in production and shipping continue to impact global supply chains and consumer caution is holding back travel and demand for other services. Vaccination rates are climbing, and although the virus remains a threat, our outlook assumes that targeted health measures rather than broader economic closures will be used to contain future infections in most countries. We also assume that the increased global distribution of vaccines will help relieve supply chain disruptions, improving the availability and lowering price pressures on internationally traded goods.

In Canada, after a gain of approximately 4.5% in 2021, real gross domestic product (GDP) is expected to grow by approximately 4% in calendar 2022, led by a further recovery in consumer services demand, as well as improvements in exports and capital spending as global supply chain pressures ease. We expect that the unemployment rate will average near 6% in calendar 2022, approaching full-employment levels in the latter half of the year. Improving economic activity will more than offset diminished government assistance for business and households, supporting business and household credit growth and credit quality. Government bond issuance will decrease in 2022 on reduced deficits. Although inflation is expected to ease during the year on improved goods supplies, we expect that the Bank of Canada will respond to a tightening labour market by raising the overnight interest rate by 50 basis points in the latter half of the year. Longer-term rates will drift higher over the year as the market builds in expectations for rate hikes beyond 2022, and global central banks pull back from bond purchases under quantitative easing.

In the U.S., real GDP is expected to grow by 4.2% in calendar 2022, after growing by 5.5% in the prior calendar year. Unemployment is expected to average in the 4% range in calendar 2022, reaching full employment levels in the second half of the year. Strong employment gains and improving business revenues will support lower insolvencies. In response to achieving its employment objectives, after maintaining near-zero short-term interest rates in the first half of the year, the Federal Reserve is likely to increase rates by 50 basis points in the latter half of calendar 2022, after winding down its net purchases of bonds in the first half of the calendar year.

The economic challenges from COVID-19 have impacted all our SBUs, and while they are likely to still be present in the coming year, lower case counts and fatalities, facilitated by higher vaccination rates and other potential treatments for COVID-19, will shape the environment ahead. From a credit perspective, lower and more targeted government support will be more than offset by improving employment and business volumes. Deposit growth will continue at moderate rates, having already adjusted to the deceleration in the flow of government support payments to households and businesses. The interest rate environment is expected to continue to have a modestly negative impact on the net interest margins for all our SBUs.

For Canadian Personal and Business Banking, mortgage demand growth could decelerate slightly in the coming fiscal year on softer home sales volumes and higher interest rates. We expect to see a modest acceleration in growth in non-mortgage credit demand in the next fiscal year as a result of the continued easing of pandemic-related constraints on economic activity, which will support an increase in consumer spending. Further increases in consumer spending are expected to have a positive impact on retail transaction volumes. Continued demand for business lending products is anticipated as small businesses expand in response to the economic recovery.

Our Canadian and U.S. wealth management businesses are expected to benefit in the coming fiscal year from a further economic recovery, with investors continuing to look for alternatives to what will still be low real interest rates.

Our Capital Markets business is expected to benefit in the coming fiscal year from trading volumes driven by greater volatility as interest rates rise, from merger and acquisition activity as corporate consolidations continue, as well as from healthy equity issuance, but could be negatively impacted by lower corporate and provincial bond issuance. Loan demand in our Canadian and U.S. commercial banking businesses is expected to continue to grow at a moderate pace in the coming fiscal year in response to improving economic conditions.

The economic outlook described above reflects numerous assumptions regarding the economic impact of the COVID-19 pandemic. Although its severity appears to be diminishing where vaccination rates are high, case counts are still escalating in some countries, and uncertainties remain regarding the pace of global vaccination efforts, the need for booster doses, and the degree to which they will contain existing and potential new variants, without measures that limit economic activity. Expectations reflect currently available information and are subject to change as new information on epidemiology and government health measures becomes available. As a result, actual experience may differ materially from expectations.

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 consolidated financial statements for further details. With the economic recovery well underway, and the significant easing of restrictive public health measures, the level of our client relief programs has reduced significantly relative to 2020. 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.

 

6		CIBC 2021 ANNUAL REPORT

Management’s discussion and analysis

 

Significant events

Sale of certain banking assets in the Caribbean

On October 12, 2021, FirstCaribbean International Bank Limited (CIBC FirstCaribbean) announced that it had entered into agreements to sell its banking assets in St. Vincent, Grenada, Dominica, St. Kitts and Aruba. The transactions are subject to regulatory approvals and other closing conditions, which are expected to be finalized in the first half of fiscal 2022. The impacts upon closing are not expected to be material.

Acquisition of Canadian Costco credit card portfolio

On September 2, 2021, we announced that we entered into a long-term agreement to become the exclusive issuer of Costco-branded Mastercard credit cards in Canada. We will also acquire the existing Canadian Costco credit card portfolio, which has over $3 billion in outstanding balances. This transaction is expected to be completed in the first half of fiscal 2022, subject to customary closing conditions.

Sale of CIBC FirstCaribbean

On November 8, 2019, we announced that we had entered into a definitive agreement to sell 66.73% of the outstanding shares of CIBC FirstCaribbean to GNB Financial Group Limited (GNB), subject to regulatory approvals.

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.

For additional information, see Note 4 and Note 9 to our consolidated financial statements.

 

CIBC 2021 ANNUAL REPORT			7

Management’s discussion and analysis

 

Financial performance overview

This section provides a review of our consolidated financial results for 2021. A review of our SBU results follows on pages 18 to 29. Refer to page 13 for a review of our financial performance for 2020.

2021 Financial results review

Reported net income for the year was $6,446 million, compared with $3,792 million in 2020.

Adjusted net income⁽¹⁾ for the year was $6,687 million, compared with $4,447 million in 2020.

Reported diluted EPS for the year was $13.93, compared with $8.22 in 2020.

Adjusted diluted EPS⁽¹⁾ for the year was $14.47, compared with $9.69 in 2020.

2021

Net income was affected by the following items of note:

•

$125 million ($92 million after-tax) increase in legal provisions (Corporate and Other);

•

$109 million ($80 million after-tax) charge related to the consolidation of our real estate portfolio (Corporate and Other);

•

$79 million ($60 million after-tax) amortization of acquisition-related intangible assets ($50 million after-tax in U.S. Commercial Banking and Wealth Management and $10 million after-tax in Corporate and Other); and

•

$12 million ($9 million after-tax) in transaction and integration-related costs(2) associated with the acquisition of the Canadian Costco credit card portfolio (Canadian Personal and Business Banking).

The above items of note increased non-interest expenses by $325 million and decreased income taxes by $84 million. In aggregate, these items of note decreased net income by $241 million.

2020

Net income was affected by the following items of note:

•

$339 million ($250 million after-tax) restructuring charge primarily related to employee severance (Corporate and Other);

•

$248 million ($248 million after-tax) goodwill impairment charges related to our controlling interest in CIBC FirstCaribbean of which $28 million was recognized in the second quarter and $220 million was recognized in the fourth quarter (Corporate and Other);

•

$114 million ($84 million after-tax) charge related to the consolidation of our real estate portfolio (Corporate and Other);

•

$105 million ($80 million after-tax) amortization of acquisition-related intangible assets ($6 million after-tax in Canadian Personal and Business Banking, $1 million after-tax in Canadian Commercial Banking and Wealth Management, $61 million after-tax in U.S. Commercial Banking and Wealth Management, and $12 million after-tax in Corporate and Other);

•

$79 million ($58 million after-tax) gain as a result of plan amendments related to pension and other post-employment plans (Corporate and Other); and

•

$70 million ($51 million after-tax) increase in legal provisions (Corporate and Other).

The above items of note increased non-interest expenses by $797 million and decreased income taxes by $142 million. In aggregate, these items of note decreased net income by $655 million.

 

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

(2)

Transaction and integration costs are comprised of direct and incremental costs incurred as part of planning for and executing the integration of the Canadian Costco credit card portfolio, including enabling cross-sell opportunities, the upgrade and conversion of systems and processes, project management and communication costs.

Net interest income and margin

 

$ millions, for the year ended October 31		2021				2020				2019
Average interest-earning assets		$	721,686			$	654,142			$	572,677
Net interest income			11,459				11,044				10,551
Net interest margin on average interest-earning assets			1.59	%			1.69	%			1.84	%

Net interest income was up $415 million or 4% from 2020, primarily due to volume growth across our businesses and higher trading revenue, partially offset by lower product spreads as a result of changes in the interest rate environment and the impact of foreign exchange translation.

Net interest margin on average interest-earning assets was down 10 basis points, primarily due to a shift in the mix of average interest-earning assets, and an increase in HQLA driven by deposit growth, as well as the current low interest environment.

Additional information on net interest income and margin is provided in the “Supplementary annual financial information” section.

 

8		CIBC 2021 ANNUAL REPORT

Management’s discussion and analysis

 

Non-interest income

 

$ millions, for the year ended October 31		2021				2020				2019
Underwriting and advisory fees		$	713			$	468			$	475
Deposit and payment fees			797				781				908
Credit fees			1,152				1,020				958
Card fees			460				410				458
Investment management and custodial fees (1)(2)			1,621				1,382				1,305
Mutual fund fees (2)			1,772				1,586				1,595
Insurance fees, net of claims			358				386				430
Commissions on securities transactions			426				362				313
Gains (losses) from financial instruments measured/designated at fair value through profit or loss (FVTPL), net (3)			607				694				761
Gains (losses) from debt securities measured at fair value through other comprehensive income (FVOCI) and amortized cost, net			90				9				34
Foreign exchange other than trading			276				234				304
Income from equity-accounted associates and joint ventures (1)			55				79				92
Other			229				286				427
		$	8,556			$	7,697			$	8,060

(1)	Custodial fees directly recognized by CIBC are included in Investment management and custodial fees. Our proportionate share of the custodial fees from the joint ventures which CIBC has with The Bank of New York Mellon are included within Income from equity-accounted associates and joint ventures.

(2)

Investment management fees and mutual fund fees are driven by various factors, including the amount of AUM. Investment management fees in our asset management and private wealth management businesses are generally driven by the amount of AUM, while investment management fees in our retail brokerage business are driven by a combination of the amount of AUA and, to a lesser extent, other factors not directly related to the amount of AUA (e.g., flat fees on a per account basis).

(3)	Includes $87 million of loss (2020: $31 million of loss; 2019: $54 million of loss) relating to non-trading financial instruments measured/designated at FVTPL.

Non-interest income was up $859 million or 11% from 2020.

Underwriting and advisory fees were up $245 million or 52%, primarily due to higher equity and debt issuance revenue and advisory activity.

Credit fees were up $132 million or 13%, primarily due to growth in commercial loans.

Card fees were up $50 million or 12%, primarily due to higher client transaction activity in Canadian Personal and Business Banking.

Investment management and custodial fees were up $239 million or 17%, primarily due to AUA and AUM growth in our wealth management businesses.

Mutual fund fees were up $186 million or 12%, primarily due to market appreciation and net sales in our wealth management businesses.

Commissions on securities transactions were up $64 million or 18%, primarily due to higher trading volume in our retail brokerage business.

Gains (losses) from financial instruments measured/designated at FVTPL, net were down $87 million or 13%, primarily due to lower trading revenue, treasury activities and mark-to-market losses related to certain non-trading derivatives that were largely offset by net interest income recognized on FVTPL securities held as economic hedges.

Trading revenue (TEB)⁽¹⁾⁽²⁾

 

$ millions, for the year ended October 31		2021				2020				2019
Trading revenue consists of:
Net interest income (1)		$	1,020			$	904			$	633
Non-interest income (3)			694				725				815
		$	1,714			$	1,629			$	1,448
Trading revenue by product line:
Interest rates		$	328			$	528			$	300
Foreign exchange			651				674				585
Equities (1)			548				280				386
Commodities			158				182				117
Other			29				(35	)			60
		$	1,714			$	1,629			$	1,448

(1)

Includes a TEB adjustment of $204 million (2020: $183 million; 2019: $177 million) reported within Capital Markets. Excludes a TEB adjustment of nil (2020: nil; 2019: $2 million) on non-trading activities reported within U.S. Commercial Banking and Wealth Management. See “Strategic business units overview” section and Note 31 to our consolidated financial statements for further details.

(2)

Trading activities is based on the risk definition of trading for regulatory capital and trading market risk management purposes. Positions in a trading book are considered trading provided the book and positions continue to meet OSFI defined trading book criteria set out in OSFI’s Capital Adequacy Requirements.

(3)

Gains (losses) from financial instruments measured/designated at FVTPL of $607 million (2020: $694 million; 2019: $761 million) consists of a gain of $694 million (2020: $725 million; 2019: $815 million) related to trading financial instruments measured/designated at FVTPL and a loss of $87 million (2020: $31 million; 2019: $54 million) relating to non-trading financial instruments measured/designated at FVTPL.

Trading revenue was up $85 million or 5% from 2020, primarily due to higher equities trading revenue, partially offset by lower interest rates trading revenue.

Trading revenue comprises net interest income and non-interest income. Net interest income arises from interest and dividends relating to financial assets and liabilities associated with trading activities, other than derivatives, net of interest expense and interest income associated with funding these assets and liabilities. Non-interest income includes realized and unrealized gains and losses on securities mandatorily measured at FVTPL and income relating to changes in fair value of derivative financial instruments. Trading revenue excludes underwriting fees and commissions on securities transactions, which are shown separately in the consolidated statement of income. Trading activities and related risk management strategies can periodically shift income between net interest income and non-interest income. Therefore, we view total trading revenue as the most appropriate measure of trading performance.

 

CIBC 2021 ANNUAL REPORT			9

Management’s discussion and analysis

 

Provision for credit losses

 

$ millions, for the year ended October 31		2021				2020				2019
Provision for (reversal of) credit losses – impaired
Canadian Personal and Business Banking		$	484			$	625			$	790
Canadian Commercial Banking and Wealth Management			6				162				159
U.S. Commercial Banking and Wealth Management			104				133				68
Capital Markets			32				121				109
Corporate and Other			76				24				21
			702				1,065				1,147
Provision for (reversal of) credit losses – performing
Canadian Personal and Business Banking			(134	)			564				99
Canadian Commercial Banking and Wealth Management			(45	)			141				4
U.S. Commercial Banking and Wealth Management			(179	)			354				5
Capital Markets			(132	)			190				51
Corporate and Other			(54	)			175				(20	)
			(544	)			1,424				139
		$	158			$	2,489			$	1,286

Provision for credit losses was down $2,331 million or 94% from 2020, as the current year reflected an improvement in economic conditions as well as our economic outlook, while the prior year was adversely impacted by the onset of the COVID-19 pandemic.

For further details regarding provision for credit losses in our SBUs, refer to the “Strategic business units overview” section.

Non-interest expenses

 

$ millions, for the year ended October 31		2021				2020				2019
Employee compensation and benefits
Salaries		$	3,213			$	3,529			$	3,081
Performance-based compensation			2,329				1,948				1,873
Benefits			908				782				772
			6,450				6,259				5,726
Occupancy costs (1)			916				944				892
Computer, software and office equipment			2,030				1,939				1,874
Communications			318				308				303
Advertising and business development			237				271				359
Professional fees			277				203				226
Business and capital taxes			111				117				110
Other			1,196				1,321				1,366
		$	11,535			$	11,362			$	10,856

(1)	In 2021 and 2020, occupancy costs include charges of $109 million and $114 million, respectively, related to the consolidation of our real estate portfolio, shown as items of note.

Non-interest expenses were up $173 million or 2% from 2020.

Employee compensation and benefits were up $191 million or 3%, primarily due to higher performance-based compensation. The prior year included a restructuring charge primarily related to employee severance, and a gain as a result of plan amendments related to pension and other post-employment benefit plans, both shown as an item of note.

Computer, software and office equipment were up $91 million or 5%, primarily due to higher spending on strategic initiatives.

Advertising and business development were down $34 million or 13%, primarily due to lower spending driven by the impact of the COVID-19 pandemic.

Professional fees were up $74 million or 36%, primarily due to higher spending on strategic initiatives.

Other expenses were down $125 million or 9%, as the prior year included a goodwill impairment charge, partially offset by an increase in legal provisions in the current year, both shown as an item of note.

Taxes

 

$ millions, for the year ended October 31		2021				2020				2019
Income taxes		$	1,876			$	1,098			$	1,348
Indirect taxes (1)
Goods and Services Tax (GST), Harmonized Sales Tax (HST) and sales taxes			403				411				418
Payroll taxes			306				292				271
Capital taxes			77				79				76
Property and business taxes			70				76				72
Total indirect taxes			856				858				837
Total taxes		$	2,732			$	1,956			$	2,185
Reported effective tax rate			22.5	%			22.5	%			20.8	%
Total taxes as a percentage of net income before deduction of total taxes			29.8	%			34.0	%			29.9	%

 

(1)	Certain amounts are based on a paid or payable basis and do not factor in capitalization and subsequent amortization.

 

10		CIBC 2021 ANNUAL REPORT

Management’s discussion and analysis

 

Total income and indirect taxes were up $776 million from 2020.

Income tax expense was $1,876 million, up $778 million from 2020. This was primarily due to higher income.

Indirect taxes overall were consistent with the prior year, with an increase in payroll taxes offset by decreases in other indirect taxes. Indirect taxes are included in non-interest expenses.

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 for approximately $1,420 million of additional income tax by denying the tax deductibility of certain 2011 to 2016 Canadian corporate dividends on the basis that they were part of a “dividend rental arrangement”. The dividends that were subject to the reassessments are similar to those prospectively addressed by the rules in the 2015 and 2018 Canadian federal budgets. In August 2021, CIBC filed a Notice of Appeal with the Tax Court of Canada and the matter is now in litigation. 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 consolidated financial statements.

In November 2021, the Tax Court of Canada ruled against CIBC on its 2007 foreign exchange capital loss reassessment (Decision). CIBC disagrees with the Decision and filed its Appeal in November 2021. CIBC remains confident that its tax filing position was appropriate. Accordingly, no amounts have been accrued in the consolidated financial statements. The exposure of additional tax and interest related to this and similar matters is approximately $300 million in addition to the potential inability to utilize approximately $500 million in unrecognized capital tax loss carryforwards.

Foreign exchange

The estimated impact of U.S. dollar translation on key lines of our consolidated statement of income, as a result of changes in average exchange rates, is as follows:

 

		2021				2020				2019
		vs.				vs.				vs.
$ millions, for the year ended October 31		2020				2019				2018
Estimated increase (decrease) in:
Total revenue		$	(307	)		$	50			$	124
Provision for credit losses			13				9				7
Non-interest expenses			(141	)			26				66
Income taxes			(26	)			3				5
Net income			(153	)			12				46
Impact on EPS:
Basic		$	(0.34	)		$	0.03			$	0.10
Diluted			(0.34	)			0.03				0.10
Average USD appreciation relative to CAD			(6.6	)%			1.1	%			3.2	%

Fourth quarter review

 

$ millions, except per share amounts, for the three months ended																2021																2020 (1)
				Oct. 31				Jul. 31				Apr. 30				Jan. 31				Oct. 31				Jul. 31				Apr. 30				Jan. 31
Revenue
Canadian Personal and Business Banking				$	2,128			$	2,056			$	1,941			$	2,025			$	1,997			$	1,910			$	1,936			$	2,079
Canadian Commercial Banking and Wealth Management					1,240				1,207				1,135				1,088				1,028				1,013				1,025				1,055
U.S. Commercial Banking and Wealth Management					562				539				532				561				519				512				511				501
Capital Markets (2)					1,012				1,140				1,194				1,174				934				1,146				967				1,006
Corporate and Other (2)					122				114				130				115				122				127				139				214
Total revenue				$	5,064			$	5,056			$	4,932			$	4,963			$	4,600			$	4,708			$	4,578			$	4,855
Net interest income				$	2,980			$	2,893			$	2,747			$	2,839			$	2,792			$	2,729			$	2,762			$	2,761
Non-interest income					2,084				2,163				2,185				2,124				1,808				1,979				1,816				2,094
Total revenue					5,064				5,056				4,932				4,963				4,600				4,708				4,578				4,855
Provision for (reversal of) credit losses					78				(99	)			32				147				291				525				1,412				261
Non-interest expenses					3,135				2,918				2,756				2,726				2,891				2,702				2,704				3,065
Income before income taxes					1,851				2,237				2,144				2,090				1,418				1,481				462				1,529
Income taxes					411				507				493				465				402				309				70				317
Net income				$	1,440			$	1,730			$	1,651			$	1,625			$	1,016			$	1,172			$	392			$	1,212
Net income (loss) attributable to:
Non-controlling interests				$	4			$	5			$	4			$	4			$	1			$	2			$	(8	)		$	7
Equity shareholders					1,436				1,725				1,647				1,621				1,015				1,170				400				1,205
EPS		– basic		$	3.08			$	3.77			$	3.56			$	3.56			$	2.21			$	2.56			$	0.83			$	2.64
		– diluted			3.07				3.76				3.55				3.55				2.20				2.55				0.83				2.63

 

(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.

Compared with Q4/20

Net income for the quarter was $1,440 million, up $424 million or 42% from the fourth quarter of 2020.

Net interest income was up $188 million, primarily due to volume growth across our businesses and higher treasury revenue, partially offset by lower product spreads.

Non-interest income was up $276 million or 15%, primarily due to higher fee-based revenue and underwriting and advisory fees.

Provision for credit losses was down $213 million or 73% from the same quarter last year. The current quarter included a provision reversal on performing loans of $34 million, while the same quarter last year included a provision for credit losses of $113 million. Provision for credit losses on impaired loans was down $66 million as the same quarter last year was adversely impacted by the COVID-19 pandemic.

 

CIBC 2021 ANNUAL REPORT			11

Management’s discussion and analysis

 

Non-interest expenses were up $244 million or 8%, primarily due to higher employee-related compensation, spending on strategic initiatives and an increase in legal provisions, shown as an item of note. The same quarter last year included a goodwill impairment charge, partially offset by a gain as a result of plan amendments related to pension and other post-employment plans.

Income tax expense was up $9 million or 2%, primarily due to higher income.

Compared with Q3/21

Net income for the quarter was down $290 million or 17% from the prior quarter.

Net interest income was up $87 million or 3%, primarily due to volume growth across our businesses and higher trading revenue, partially offset by lower product spreads.

Non-interest income was down $79 million or 4%, primarily due to lower trading revenue and lower underwriting and advisory fees, partially offset by higher fee-based revenue.

The current quarter included a provision for credit losses of $78 million while the prior quarter included a provision reversal for credit losses of $99 million. The provision reversal on performing loans was down $173 million as the prior quarter included a higher reversal related to the favourable change in economic conditions as well as our economic outlook. Provision for credit losses on impaired loans was comparable with the prior quarter.

Non-interest expenses were up $217 million or 7%, primarily due to the charge related to the consolidation of our real estate portfolio, shown as an item of note, higher corporate support costs and the timing of spending on strategic initiatives.

Income tax expense was down $96 million or 19%, primarily due to lower income.

Quarterly trend analysis

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 is 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, as well as the level of client investment activity. 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 commercial banking loan and deposit growth as well as from strong markets. In Commercial Banking, loan growth has accelerated throughout fiscal 2021 as the economic recovery strengthened. The benefit from loan and deposit growth has been partially offset by the lower interest rate environment. In Wealth Management, AUA and AUM growth has been driven by continued strong market performance and record levels of investment sales subsequent to the market volatility noted in the second quarter of 2020.

U.S. Commercial Banking and Wealth Management has benefitted from growth in strategic clients that is driving increased loans, deposits, AUM, and fee income. Loan growth has accelerated due to the new client additions and economic recovery. Wealth management AUA and AUM growth has been driven by a continued market recovery and strong sales momentum subsequent to the market volatility in the second quarter of 2020.

Capital Markets had lower trading revenue in the second and fourth quarters of 2020, while the second and third quarters of 2021 included increased revenue from underwriting and advisory activities.

Corporate and Other included the impact of the COVID-19 pandemic that led to excess liquidity costs from the second quarter of 2020 to the second quarter of 2021 that negatively impacted revenue. The interest rate environment and narrower margins have negatively impacted revenue in international banking.

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 our economic outlook. As a result of the impact of the COVID-19 pandemic beginning in the second quarter of 2020, some portions of our loan portfolios were negatively impacted by the decline in economic activity associated with restrictive public health measures, mitigated to a large extent by large-scale government support and relief programs targeting both individuals and businesses. Although public health measures in most jurisdictions have eased in response to increasing vaccination rates, and economic recovery is well underway, uncertainty related to the economic environment persists. There is considerable judgment involved in the estimation of credit losses in the current environment.

The significant increase in provision for credit losses on performing loans in the second quarter and, to a lesser extent, the third and fourth quarters of 2020 reflects the early stages of the COVID-19 pandemic, which impacted all our SBUs, as well as continued pressure on oil prices. All four quarters of 2021 reflect a moderate improvement in economic conditions as well as our economic outlook.

In Canadian Personal and Business Banking, the third and fourth quarters of 2020 and the first, third and the fourth quarters 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 quarter and the second half of 2020 included provisions on one fraud-related impairment.

In U.S. Commercial Banking and Wealth Management, the first quarter of 2021 and the second half of 2020 included higher provisions on impaired loans.

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

In Corporate and Other, the third quarter of 2021 included higher provisions on impaired loans in CIBC FirstCaribbean.

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, the third quarter of 2020 and the third

 

12		CIBC 2021 ANNUAL REPORT

Management’s discussion and analysis

 

quarter and fourth quarter of 2021 included increases in legal provisions in Corporate and Other, all 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 and the fourth quarter of 2021 included charges related to the consolidation of our real estate portfolio as a result of our upcoming move to our new global headquarters. The fourth quarter of 2020 included 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.

Review of 2020 financial performance

 

$ millions, for the year ended October 31				Canadian Personal and Business Banking				Canadian Commercial Banking and Wealth Management				U.S. Commercial Banking and Wealth Management (1)				Capital Markets (1)				Corporate and Other (1)				CIBC Total
2020 (2)		Net interest income		$	5,849			$	1,248			$	1,422			$	2,354			$	171			$	11,044
		Non-interest income			2,073				2,873				621				1,699				431				7,697
		Total revenue			7,922				4,121				2,043				4,053				602				18,741
		Provision for credit losses			1,189				303				487				311				199				2,489
		Non-interest expenses			4,308				2,179				1,126				1,929				1,820				11,362
		Income (loss) before income taxes			2,425				1,639				430				1,813				(1,417	)			4,890
		Income taxes			640				437				55				505				(539	)			1,098
		Net income (loss)		$	1,785			$	1,202			$	375			$	1,308			$	(878	)		$	3,792
		Net income (loss) attributable to:
		Non-controlling interests		$	–			$	–			$	–			$	–			$	2			$	2
		Equity shareholders			1,785				1,202				375				1,308				(880	)			3,790
2019 (2)		Net interest income		$	5,944			$	1,205			$	1,327			$	1,681			$	394			$	10,551
		Non-interest income			2,296				2,822				584				1,794				564				8,060
		Total revenue			8,240				4,027				1,911				3,475				958				18,611
		Provision for credit losses			889				163				73				160				1				1,286
		Non-interest expenses			4,459				2,106				1,114				1,802				1,375				10,856
		Income (loss) before income taxes			2,892				1,758				724				1,513				(418	)			6,469
		Income taxes			766				471				76				396				(361	)			1,348
		Net income (loss)		$	2,126			$	1,287			$	648			$	1,117			$	(57	)		$	5,121
		Net income (loss) attributable to:
		Non-controlling interests		$	–			$	–			$	–			$	–			$	25			$	25
		Equity shareholders			2,126				1,287				648				1,117				(82	)			5,096

 

(1)	Capital Markets revenue and income taxes are reported on a TEB, as were U.S. Commercial Banking and Wealth Management revenue and income taxes in 2019, with an equivalent offset in the revenue and income taxes of Corporate and Other.

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

The following discussion provides a comparison of our results of operations for the years ended October 31, 2020 and 2019.

Overview

Net income for 2020 was $3,792 million, compared with $5,121 million in 2019. The decrease in net income of $1,329 million was due to a higher provision for credit losses and higher non-interest expenses, partially offset by higher revenue.

Consolidated CIBC

Net interest income

Net interest income was up $493 million or 5% from 2019, primarily due to volume growth across our businesses, higher trading revenue and higher revenue from Capital Markets financing activities, partially offset by narrower margins driven by changes in the interest rate environment and interest rate relief provided to our credit card clients as part of the CIBC client relief programs offered to support our clients during the COVID-19 pandemic.

Non-interest income

Non-interest income was down $363 million or 5% from 2019, primarily due to lower client transaction activity as a result of the pandemic, lower sublease revenue relating to our adoption of IFRS 16 “Leases” in 2020 that was largely offset in interest income and non-interest expenses, mark-to-market losses related to economic hedges of certain non-trading activities that were largely offset in net interest income and lower trading revenue.

Provision for credit losses

Provision for credit losses was up $1,203 million or 94% from 2019. Provision for credit losses on performing loans was up $1,285 million from 2019, mainly due to increased provisions related to the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was down $82 million, due to lower insolvencies and write-offs in credit cards and personal lending, reflecting the impact of the client relief and government support programs, partially offset by higher provisions in business and government loans.

Non-interest expenses

Non-interest expenses were up $506 million or 5% from 2019, mainly due to a restructuring charge primarily related to employee severance, shown as an item of note, and higher performance-based compensation and additional employee benefits provided to support our employees during the COVID-19 pandemic.

Income taxes

Income tax expense was down $250 million or 19% from 2019, primarily due to lower income.

 

CIBC 2021 ANNUAL REPORT			13