CIBC reported a rise in mortgage delinquencies in the first quarter, though they remain below pre-pandemic levels and aren’t expected to translate into “material” losses, the bank said.
“We’ve seen 90-plus day delinquency rates trending higher over the past 12 months, reflecting the impact of higher rates and cost pressures our clients are facing,” Chief Risk Officer Frank Guse said on the bank’s quarterly earnings call.
“However, the overall credit quality and portfolio health of our clients remain strong,” he said, adding that both credit card and mortgage delinquency rates remain below 2019 levels.
The percentage of the bank’s residential mortgage loans that are in arrears by at least 90 days rose to 0.25% from 0.21% in Q4 and 0.16% a year earlier.
In the fourth quarter of 2019, the bank reported a delinquency rate of 0.28% in residential mortgages. That rate was even higher for insured mortgages—those with a down payment of less than 20%—which saw arrears surge to 0.41%.
CIBC remains “very comfortable” with risk levels
Guse said the delinquencies are being driven by those renewing at a much higher rate environment alongside a slowing housing market, but that the bank remains confident in borrowers’ ability to manage these challenges.
“We remain comfortable with this portfolio given the overall reasonable loan-to-value metrics and do not expect to see material losses in this portfolio,” he said.
Guse noted that among clients facing a renewal in the next 12 months, just 1% are those that the bank would deem “higher risk.”
CIBC President and CEO Victor Dodig echoed that confidence based on the bank’s underwriting practices and the relationships they are building with clients.
“The overwhelming majority of our clients have deeper relationships with us,” he said, pointing to deposits those clients have with the bank and the fact their mortgage clients have an average loan-to-value ratio of just 50%.
“So, that doesn’t remain a concern,” he said. “Quite frankly, what’s really a bigger concern is the lack of housing. That’s a bigger concern for me.”
Amortization periods easing
Like the other big banks, CIBC also saw the average amortization length of its residential mortgage portfolio continue to trend downward in the quarter thanks to action being taken by mortgage clients.
However, the bank did report an uptick in the percentage of loans with an amortization longer than 35, which rose to 22.8% from 22% in the fourth quarter. This is still down from a peak of 27% reached in the first quarter of 2023.
Remaining amortizations for CIBC residential mortgages
Q1 2023 | Q4 2023 | Q1 2024? | |
21-25 years | 31% | 31% | 32.4% |
26-30 years | 17% | 22% | 19.3% |
31-35 years | 3% | 2% | 1.9% |
Over 35 years | 27% | 22% | 22.8% |
This table summarizes the remaining amortization profile of CIBC’s total
Canadian residential mortgages based upon current customer payment amounts.
CIBC earnings highlights
Q1 net income (adjusted): $1.8 billion (-4% Y/Y)Earnings per share (adjusted): $1.81
Q1 2023 | Q4 2023 | Q1 2024 | |
Residential mortgage portfolio | $263B | $266B | $265B |
HELOC portfolio | $19.1B | $19B | $19B |
Percentage of res’l portfolio with variable rates | 37% | 32% | 32% |
Avg. LTV of uninsured mortgage portfolio | 52% | 50% | 51% |
Canadian res’l mortgages 90+ days past due | 0.16% | 0.21% | 0.25% |
Canadian banking net interest margin (NIM) | 2.48% | 2.67% | 2.68% |
Total provisions for credit losses | $75M | $541M | $585M |
CET1 Ratio | 11.6% | 12.4% | 13% |
Source: CIBC Bank Q1 Investor Presentation
Conference Call
CIBC reported a total of $7 billion in residential mortgage originations in Q1.
The bank said it added 700,000 net new clients over the last 12 months.
Simplii, CIBC’s direct digital bank, also reported 180,000 net new clients added over the last 12 months. “We’ll continue to expand our digital channels and capabilities to build our pipeline of clients for future growth,” said President and CEO Victor Dodig.
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