Building CIBC for Tomorrow May 2005

Transcription

1 Building CIBC for Tomorrow INVESTOR PRESENTATION Information disclosed within this presentation is current through April 30, 2005, unless otherwise indicated Presentation Outline Investing in Canada Investing in the Banking Sector Investing in CIBC Sustainable returns to shareholders Financial Summary Building for Tomorrow 2 1

2 Economy High relative returns Since April , S&P/TSX total shareholder return is 15.8% vs. 6.3% for S&P 500 Favourable economic indicators Core inflation is low at 1.9% Steady growth in consumer spending Near record low unemployment rate at 6.8% Solid fiscal performance Seven consecutive years of Government surplus - $6B for F2005 Canada expected to be only G-7 country to post government surplus in F2005 and F Banking Industry Strong Fundamentals Favourable credit conditions Personal and corporate bankruptcies remain at historically low levels Low and stable interest rates with no increase to BoC s official rate since October 2004 Sustainable earnings growth Canadian Banks Index has outperformed S&P/TSX composite by 70.3% since October 1999 Philadelphia Bank Index has outperformed the S&P 500 by 36.4% since October 1999 Diversified revenue stream Net Interest vs. Non-interest CIBC mix was 43/57 in Q2/ % of CIBC s Q2/2005 core (1) revenue was from Retail, 24.4% from Wealth and 27.3% from World Markets (1) Excluding revenue from Corporate and Other. 4 2

3 Banking Industry Compelling Valuations Low multiples (1) Canadian bank average P/E is 12.8x 2005E earnings compared to 14.5X - S&P/TSX and 17.9x - utilities index High yields (1) Bank index yield is 3.0% vs. S&P/TSX at 1.7% Bank dividend to long bond yield remains high (inexpensive) vs. historical levels 70% 60% 50% 40% Dividend Yield Indicator ( ) 68.8% 30% (1) As at May 18, Banking Industry - Canada vs. Others Canadian returns are second highest among major global banking centers Global Bank Index Return Since April 30, 2004 Australia 14.8% Australia 9.1% Canada 14.7% US Europe Canada Europe 6.3% UK US 2.9% UK 0.0% 5.0% 10.0% 15.0% 20.0% 6 3

4 Sustainable Returns to Shareholders CIBC included on the Dow Jones Sustainability Index for 3rd consecutive year in 2004 Top 10% of global large-cap companies Only 2 Canadian Banks (CIBC and RBC) DJ Sustainability Index vs. DJ World Index (Ten years ended April 30, 2005) Index 10-Year Price Appreciation DJ Sustainability 91% DJ World 70% DJ World Index DJ Sustainability Index 7 Sustainable Returns to Shareholders Since 1999, CIBC s dividends have increased by more than 100%; above the average among Canadian banks Target payout ratio is 40-50% (2005 YTD: 41.0%) CIBC Quarterly Dividends per Share (annualized) $2.60 $2.20 $1.80 Growth 117% $1.40 $1.00 Q4 99 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q

5 Sustainable Returns to Shareholders Share repurchases Since October 31, MM shares repurchased for consideration of $4.2B 59% of 2005 s normal course issuer bid of 17MM shares purchased to date Shares Repurchased (MM) YTD 9 Investing in CIBC - Financial Summary Market capitalization $25.3B Market to book 2.41x Assets $288B Tier 1 capital 10.7% ROE 16.2% PE ratio (12 months trailing) 12.7x $819 MM unrealized corporate equity gains Dividend payout ratio 53.6% Efficiency ratio 72.1% AUA $877B YTD 2005 NIAT Retail Markets $627MM NIAT by SBU World Markets $288MM Wealth Management $192MM 10 5

6 Building for Tomorrow Putting Clients First CIBC Imperial Service CIBC Private Wealth Management CIBC Small Business CIBC Wood Gundy CIBC Personal Banking CIBC World Markets 11 Building for Tomorrow Putting Clients First Improving the in-branch experience Additional customer staff Introduction of branch ambassadors Extended service hours Offering convenient alternatives to in-branch banking More customer friendly Internet site and telephone banking services Providing the proper tools Conducted a national training program on building client satisfaction involving 10,000 frontline employees Coaching and mentoring programs 12 6

7 Building for Tomorrow Improving Productivity Q YTD: 66.7% Objective to be competitive with our peer group Eliminate duplication of effort Implement revised global expense policies and online reporting Streamline processes throughout the organization Increase automation of workflow processes Implement online employee expense reporting 13 Building for Tomorrow Managing Risk $B Specific Provision for Credit Losses as % of Net Loans and Acceptances (1) Annualized % of Net Loans and Acceptances 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Consumer Business & Government Total (1) Excludes loan loss on transfer to Held for Sale portfolio: $135MM in Q3/03 and $93MM in Q4/03. RWA and Capital Ratio Trends Risk Weighted Assets Tier 1 Capital Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 $B 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% $MM Impaired Loans Gross Impaired Loans Net Impaired Loans (excluding General Allowance) Net Impaired Loans as % of Loans & BAs 1999* 2000* 2001* 2002* 2003* Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 CIBC Trading Books Total VaR 1.9% 1.7% 1.5% 1.3% 1.1% 0.9% 0.7% 0.5% 0.3% 0.1% -0.1% Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 NIL as a % of Total Loans and BAs 14 7

8 Going forward we will manage our business mix within a range: 65 75% retail/25 35% wholesale (as measured by economic capital (2) 80% 70% 60% 50% 40% 30% 20% 10% 0% (2) ) Business Mix Retail (1) Economic Capital (2) 50% 48% 55% 58% 60% 64% 65% 67% Building for Tomorrow Managing Risk 71% 72% 72% 73% Q3/02 Q4/02 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 (1) Retail = Retail Markets, Wealth Management and Commercial Banking. See Notes to Users on slide 29. (2) See Notes to Users on slide Retail Markets Strategy Retail Markets Strategy 16 8

9 Retail Markets Great brand with an emotional connection to the client Starting Point Transactional, nonemotive brand End Goal Brand with emotional customer ties 17 Retail Markets Net revenue per Regular Workforce Headcount (RWH) up 24% since January 2001 Revenue Per RWH (1) $MM $85 $80 $75 $70 $65 $60 $55 $50 $45 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Gross Revenue Per RWH Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Net Revenue Per RWH (1) Excludes non-recurring items as follows: Q2/01 Sale of merchant card services ($58MM). Q3/02 Sale of Life of Barbados shares ($13MM). Q4/02 Gain on combination of West Indies operations ($190MM). Q1/05 Sale of Republic Bank ($85MM) and ACE Aviation Holding shares ($34MM) 18 9

10 Retail Markets Product strength through multi-channel distribution Mortgage Market Share (1) Card Loans Administered ($B) 14.8% 14.7% 14.7% 14.7% 14.4% 13.2% % Q1/ Q1/05 #1 in Purchase Volumes Market Share 30.5% (1) Two month lag. 19 Wealth Management Strategy Leadership in relationship- based advice Strength in product leadership and packaging Continued growth and momentum Scale to maximize share and drive synergies Goal To become Canada s leading wealth management franchise with industry-leading distribution capability and innovative, competitive products 20 10

11 Wealth Management Business Mix YTD 2005 Distribution is the key driver of revenue Imperial Service $400MM Private Wealth Management $74MM Wealth Products (1) $254MM Retail Brokerage $565MM Other $23MM (1) Wealth Products includes Consolidated Mutual Funds, Fixed Term Investments and TAL Global. 21 Wealth Management Full Service Brokerage Leadership AUA growth continued into Q2/2005 $B Q1/05 Assets Under Administration 22 11

12 Wealth Management Imperial Service A Unique Market Position Imperial Service is a leader in branch-based based advice $45MM $47MM $56MM $59MM $62MM $665K $63MM $680K $64MM $701K $616K $401K $514K $584K Q1/05 Funds Managed / FA (million) REV. / FA (thousands) 23 Wealth Management Leadership In Managed Solutions MUTUAL FUND WRAPS 18% market share #1 position SEPARATE ACCOUNT PROGRAMS 41% market share Established Market dominance competitive & established advantage competitive advantage #1 position 24 12

13 World Markets Strategy Strengthened distribution through retail brokerage Canadian Market Leader Pioneer in Income Trust capabilities #1 in Equity Underwriting through 1 st Half 2005 Invested in new opportunities Significantly lowered risk Goal Driving sustainable growth while maintaining the risk discipline we have embedded in the organization for the past 2 years 25 World Markets Capital Markets Increase volume in existing platforms Develop additional product capability Expand US mid-market cash equities business Investment Banking and Credit Building strong relationships with our core clients Maintaining leadership position in Canadian franchise Increasing productivity within US investment banking platform Merchant Banking Discipline and alignment with investment banking Reduce Merchant Banking to $1.5B by 2007 ($1.54B at ) Commercial Banking Balance return and risk objectives to support profitable growth 26 13

14 Building for Tomorrow -Returns to Shareholders Total Shareholder Return since October 31, 1999 % % 112% 41% Oct-99 Apr-00 Oct-00 Apr-01 Oct-01 Apr-02 Oct-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 CIBC S&P/TSX Banks Index S&P/TSX Composite Index 27 For What Matters Critical value drivers Client satisfaction Employee commitment Excellent risk management Stable growth in economic profit $60 Sustainable Growth Meaningful contribution to our $50 $40 communities Financial transparency $30 $20 $10 $0 Sep-60 Reducing Risk Sep-03 Good governance 28 14

15 Notes to Users Performance measurement CIBC uses a number of financial measures to assess the performance of our lines of business. Some measures are calculated in accordance with GAAP,while other measures do not have standardized calculations under GAAP and, accordingly, these measures described below, may not be comparable to similar measures used by other companies. This document references the following non-gaap measures: Net interest income (TEB) Management adjusts net interest income to reflect tax-exempt income on an equivalent before-tax basis. This measure enables comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income (TEB) is used to calculate the efficiency ratio, trading revenue, net interest margin and net interest margin on average interest-earning assets, all on a taxable equivalent basis. Management believes these measures permit uniform measurement, which enables users of our financial information to make comparisons more readily. Economic capital Economic capital provides the financial framework to understand the returns of each line of business, commensurate with the risk taken. Economic capital is based upon an estimate of the equity capital required to protect the business lines from future potential adverse economic scenarios that would result in significant losses. It is comprised of credit, market, operational and strategic risk capital. The capital methodologies employed quantify the level of risk within products, clients, and business lines, as required. The difference between CIBC total equity capital and economic capital allocated to the business lines is held in Corporate and Other. From time to time, CIBC's economic capital model may be enhanced as part of the risk measurement process and these changes are made prospectively. There is no comparable GAAP measure for economic capital. Economic profit Net income, adjusted for a charge on economic capital, determines economic profit. This measures the return generated by each business line in excess of our cost of equity capital, thus enabling users of our financial information to identify relative contributions to shareholder value. Reconciliation of net income to economic profit is provided with segmented information on pages 6 to 8. Segmented return on equity We use return on equity (ROE) on a segmented basis for performance evaluation and resource allocation decisions. While ROE for total CIBC provides a measure of return on common equity, ROE on a segmented basis provides a similar metric related to the capital allocated to the segments. We use economic capital to calculate ROE on a segmented basis. As a result, segmented ROE is a non-gaap measure. Business mix: Retail / wholesale ratio While we manage commercial banking operations within CIBC World Markets, some financial institutions include commercial banking in retail operations. From time to time, some measures will be presented on an aggregate basis for Retail Markets, Wealth Management, and commercial banking operations for comparison purposes. Such measures include revenue, net income, and economic capital. ROE and EPS on cash basis Cash basis measures are calculated by adding back the after-tax effect of goodwill and other intangible expenses to net income. Management believes these measures permit uniform measurement, which enables users of CIBC s financial information to make comparisons more readily. 29 Forward Looking Statements This presentation release contains forward-looking statements which are made pursuant to the safe harbor provisions of the United States Private Securities Litigation Reform Act of These forward-looking statements include, but are not limited to, statements about the operations, business lines, financial condition, risk management, priorities, targets, ongoing objectives, strategies and outlook of CIBC for 2004 and subsequent periods. Forward-looking statements are typically identified by the words believe, expect, anticipate, intend, estimate and other similar expressions or future or conditional verbs such as will, should, would and could. A forward-looking statement is subject to inherent risks and uncertainties that may be general or specific. A variety of factors, many of which are beyond CIBC s control, affect the operations, performance and results of CIBC and its business lines, and could cause actual results to differ materially from the expectations expressed in any of CIBC s forward-looking statements. These factors include: current, pending and proposed legislative or regulatory developments in the jurisdictions where CIBC operates, including pending developments in Canadian laws regulating financial institutions and U.S. regulatory changes affecting foreign companies listed on a U.S. exchange, as well as amendments to, and interpretations of, risk-based capital guidelines and reporting instructions; the resolution of legal proceedings and related matters; the effect of applying future accounting changes; changes in tax laws; political conditions and developments; the possible effect on CIBC's business of international conflicts and the war on terror; the accuracy and completeness of information provided to CIBC by clients and counterparties; intensifying competition from established competitors and new entrants in the financial services industry; technological change; global capital market activity; interest rate fluctuations; currency value fluctuations; general economic conditions worldwide, as well as in Canada, the U.S. and other countries where CIBC has operations; changes in market rates and prices which may adversely affect the value of financial products; CIBC s success in developing and introducing new products and services, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels, including electronic commerce-based efforts. This list is not exhaustive of the factors that may affect any of CIBC s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on CIBC s forward-looking statements. CIBC does not undertake to update any forward-looking statement that is contained in this presentation

16 Forward Looking Statements Investor Relations contacts: Kathy Humber, CFA, Senior Vice-President (416) John Ferren, CA, CFA, Director (416) Rachel Gauci, Director (416) Investor Relations Fax Number (416) Visit us in the Investor Relations section at