Canadian Imperial Bank of Commerce (CIBC) has announced favourable changes in its economic outlook for the Caribbean region.
As a result, the bank has included a reversal of credit losses on performing loans for 2021. To that end, provision for credit losses in CIBC FirstCaribbean was down CAD$177 million from 2020. Additionally, provision for credit losses on impaired loans was up due to higher provisions in CIBC FirstCaribbean.
The details were laid out in CIBC's 2021 annual report which was published on December 2.
The company highlighted that after performing its annual impairment test on August 1, 2021, it was determined that the estimated recoverable amount of the CIBC FirstCaribbean's cash generating unit (CGU) was in excess of its carrying amount. As a result, no impairment charge was recognised during 2021.
This follows goodwill impairment charges related to the bank's controlling interest in CIBC FirstCaribbean in the fourth quarter of 2019 and the second and fourth quarters of 2020.
CIBC noted that the recoverable amount of CIBC FirstCaribbean for 2021 is based on a value in use calculation that is estimated using a five-year cash flow projection approved by the management of CIBC FirstCaribbean and an estimate of the capital required to be maintained in the region to support ongoing operations.
Notwithstanding these improvements, CIBC is reporting that its 'Corporate and Other' category, which includes the results of CIBC FirstCaribbean and other strategic investments, recorded a net loss during the fourth quarter of 2021. Net loss for the 'Corporate and Other category during the quarter was CAD$233 million, compared with a net loss of CAD$359 million for the fourth quarter of 2020.
Revenue came in at CAD$122 million, which was comparable with the fourth quarter of 2020.
The bank noted that CIBC FirstCaribbean saw higher US dollar revenue, driven by higher fees, volume growth and higher treasury revenue. However, this was offset by the impact of foreign exchange translation and lower product margins.
CIBC has been looking for a way to get rid of some of its assets in the region for quite some time with at least two unsuccessful attempts so far. The latest attempt to exit some of its Caribbean holdings involves the sale of assets in four Eastern Caribbean territories worth about US$20.7 million.
CIBC acquired a controlling interest in CIBC FirstCaribbean in December 2006 and now holds 91.7% of its shares.
CIBC FirstCaribbean is a major Caribbean bank offering a full range of financial services in corporate and investment banking, retail and business banking, and wealth management. CIBC FirstCaribbean, which has assets of approximately US$13 billion, operates in the Caribbean and is traded on the stock exchanges of Barbados and Trinidad and Tobago.