Negative Points

• Impaired loan provisions were elevated this quarter, driven by a few specific events in Canadian commercial banking and capital markets.

• The bank recorded a $232 million after-tax charge related to its Caribbean operations, treated as an item of note.

• US segment NIM declined 14 basis points sequentially, due to loan growth outpacing deposit growth and lower product margins.

• Expenses increased 11% year-over-year, driven by revenue-linked compensation and continued investments in technology and strategic initiatives.

• The bank expects adjusted non-interest expenses to be up quarter-over-quarter in Q4.

• Impaired losses are expected to remain in the elevated range for the remainder of the year, with year-to-date losses at 37 basis points.

• Canadian residential mortgage delinquencies are trending higher, reflecting pressure on household cash flows from a slower housing market.

• The bank continues to build performing allowances in Canadian consumer and commercial portfolios due to macroeconomic uncertainty.

• Trade and geopolitical tensions are creating uncertainty, and the bank acknowledges the path forward will not be linear.

• The bank's CET1 ratio declined 19 basis points sequentially, partly due to the Caribbean charge and share repurchases.

Q & A Highlights

Q: What is the outlook for Canadian Personal and Business Banking growth, given the slower balance sheet growth and tariff-related uncertainty? A: Hratch Panossian, Group Head, Personal and Business Banking, Canada, stated that the strategy is to continue gaining share in targeted areas and products, driving revenue growth in the high single-digit to low double-digit range. He highlighted success in everyday banking, with demand deposits growing mid-single-digits and share gains in credit cards, while being more selective on mortgage margins. The focus on the mass affluent segment, which has grown 10% in client numbers this year, is expected to continue driving outperformance and profitability.

Q: How should we view the recent credit trends, and are we at a pivot point for releasing performing loan allowances? A: Frank Guse, Chief Risk Officer, noted that impaired losses are slightly above the initial base case due to prolonged trade tensions and geopolitical conflicts, but remain within downside case expectations. He does not believe the quarter's performing allowance release signals a pivot, as it was driven by specific events like a US CRE portfolio sale, not an improved economic outlook. He expects releases only once there is more clarity on the macro environment, with unemployment being a key driver.

Q: Is the strong growth in Capital Markets structural or cyclical, and can it continue without more capital? A: Christian Exshaw, Group Head, CIBC Capital Markets, explained that the growth is driven by a well-diversified, client-led strategy built over 20 years. While the last three quarters benefited from constructive markets, the business is foundational, with fee-based businesses like ASG and Canadian depository services providing stability. He expects high single-digit earnings growth through the cycle, with Q4 growth moderating quarter-over-quarter due to macro uncertainty, but still positive year-over-year.

Q: What is the outlook for net interest margins in Canada and the US? A: CFO Robert Sedran reiterated a stable to gradually positive bias for all-bank NIM, including in Canada, supported by the structural hedging strategy and product mix. In the US, Kevin Li, Group Head, United States Region, noted the 14 bps sequential decline was half mix-driven (strong loan growth outpacing deposits) and half pricing compression, with some repricing reflecting improving credit profiles. He expects a seasonal reversion in deposit flows in coming quarters.

Q: How does CIBC view AI's impact on headcount and productivity over the next five years? A: CEO Harry Culham stated that AI is in production at enterprise scale, acting as a "co-worker" to boost productivity. He clarified that the bank expects headcount growth over the next five years, but with significant productivity gains driving outperformance. The strategy involves investing in both people and technology, with more details to be shared at the upcoming Investor Day in December.

Q: Is the rapid growth in wholesale lending necessary to support the broader Capital Markets business, and what are the credit risks? A: Christian Exshaw confirmed that the loan growth (up 17% YoY) is foundational to building a digital infrastructure ecosystem in the US, attracting related business like hedging and trading. It is not standalone revenue generation. Frank Guse added that the originations are high-quality with strong risk ratings, and while the two-year rule of thumb for potential losses is roughly accurate, he expects loss rates to remain consistent with past experience, with no concerns about portfolio deterioration.

Q: Why were impaired PCLs above the initial guidance, and should we expect them to continue rising? A: Frank Guse explained that the overshoot was due to unforeseen events like a prolonged trade war and Middle East conflict, which were not in the base case. The elevated losses were driven by a few idiosyncratic events in Canadian commercial banking, which are not expected to recur. He expects impaired losses to remain in the current range for the rest of the year, with a potential downward trend if unemployment improves.

Q: Can you provide more detail on the deposit growth dynamics in Canada, particularly the GIC runoff? A: Hratch Panossian clarified that while overall deposits were down 1% YoY, this was driven by a 10% decline in GICs, which are investment products. The bank is successfully retaining those funds by guiding clients into managed money and mutual funds, where CIBC is leading in net sales. This shift is a win-win, as it improves client outcomes and bank economics, while everyday banking deposits continue to gain share.

Q: What drove the strong fee revenue growth this quarter? A: CFO Robert Sedran reported non-interest income up 20%, driven by constructive markets and strong trading. Market-related fees grew 25%, led by investment management, custodial, and mutual fund fees. Transaction fees increased 6%, with a notable 25% rise in credit fees from strong corporate lending and financing activity.

Q: What is the outlook for expenses in Q4? A: CFO Robert Sedran stated that adjusted non-interest expenses are expected to be up quarter-over-quarter in Q4, driven by revenue-linked compensation, increased business activity, and continued investments in technology and AI-enabled productivity initiatives.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .