Canadian Imperial Bank of Commerce (CM) Earnings

Management highlights

### Overall Financial Performance - CIBC delivered a strong start to fiscal 2026, with reported earnings per share (EPS) of $3.21 (up 47% year-over-year, including income tax recoveries) and adjusted EPS of $2.76 (up 25% year-over-year). - Total adjusted revenues hit $8.4 billion, up 15% year-over-year, with record revenues across all business segments. Adjusted net income was $2.7 billion, up 23% year-over-year, and adjusted return on equity (ROE) reached 17.4%, up 210 basis points year-over-year. - Expenses grew 12% year-over-year, resulting in 3.6% positive operating leverage, marking the 10th consecutive quarter of positive operating leverage. The CET1 capital ratio stood at 13.4%, with an average liquidity coverage ratio of 133%, reflecting a strong balance sheet. - 78% of Q1 earnings were returned to shareholders via dividends and 8 million common share repurchases. ### Strategic Priority Progress - **Grow mass affluent and private wealth franchise**: Managed personal banking clients generate ~4x the revenue of unmanaged clients, with all-time high net promoter scores. Qualified managed clients grew 6% year-over-year, driving 12% balance growth, and mass affluent clients per advisor are up 7% from operational efficiency gains. - **Expand digital-first personal banking**: 48% of retail products were sold via digital channels in Q1, up 5 percentage points year-over-year. Digital tools also improve advisor efficiency, freeing more time for client engagement. - **Deliver connectivity and differentiation across the bank**: Cross-bank referral momentum drove record Canadian commercial banking revenues, with high single-digit volume growth and margin expansion. Capital markets captured elevated client-driven volume, supported by referrals from commercial and wealth businesses. CIBC confirmed its role as a partner to the Defence, Security and Resilience Bank Development Group to capture new sector opportunities. - **Modernize the bank via technology, data, and AI investments**: AI is deployed across three pillars: revenue growth via personalized client engagement, operational efficiency via automation of manual work, and risk mitigation via improved fraud prevention, credit monitoring, and AML compliance. All AI deployments include built-in governance for regulatory alignment and responsible use. Early results include 44% higher conversion rates for personalized deposit outreach via the AI-powered Cortex platform, with 10% of Q1 targeted product sales driven by the tool.

Guidance

- Management maintained its full-year 2026 ROE guidance above 15%, and expects ROE to continue trending higher over the medium term, balanced between ongoing ROE expansion and earnings per share growth, with no over-rotation to short-term ROE gains. - Net interest margin (NIM) guidance is maintained as stable to gradually increasing over time. A seasonal sequential NIM downtick of 1-2 basis points is expected in Q2 2026, consistent with historical seasonal patterns, but this will not alter the long-term upward trend. - The structural balance sheet positioning benefit to NIM is expected to gradually roll off and become neutral by mid-2027, based on the current forward interest rate curve. Ongoing business mix optimization will continue to support NIM beyond 2027. - Full-year credit loss guidance remains unchanged, with Q1's elevated commercial banking impairments not expected to persist through the rest of the year. - Management targets annual positive operating leverage, and expects retail expense growth to moderate over the rest of 2026 while strategic investment levels continue to increase. - Capital markets growth is expected to moderate to high single-digit percentage growth by the end of fiscal 2026, after strong growth in the second half of 2025.

Segment performance

1. Canadian Personal and Business Banking: Adjusted net income increased 25% year-over-year, pre-provision earnings grew 19%, and revenues rose 13% driven by margin expansion, loan growth, and higher fee revenue. Net interest margin was up 34 basis points year-over-year and 9 basis points sequentially. Expenses grew 7%, primarily from technology investments and higher compensation. This segment contributed 38% of total adjusted net income. 2. Canadian Commercial Banking and Wealth Management: Net income grew 9% year-over-year, pre-provision pre-tax earnings rose 16%, and total revenues increased 13%. Commercial banking revenues grew 9% on 7% loan volume growth and 8% deposit volume growth with margin expansion. Wealth management revenues grew 16% driven by 14% higher AUA and 15% higher AUM. This segment contributed 28% of total adjusted net income. 3. U.S. Commercial Banking and Wealth Management: Net income rose 19% year-over-year, pre-provision pre-tax earnings grew 7%, and revenues increased 6%. Net interest income was up 10% from improved loan/deposit growth and wider deposit margins, offset partially by lower asset management performance fees. Expenses also grew 6% due to higher employee compensation and strategic initiative costs. This segment contributed 12% of total adjusted net income. 4. Capital Markets: Net income increased 42% year-over-year, and revenues grew 28% year-over-year. Global markets revenues grew across most products, investment banking saw higher underwriting and advisory activity, and corporate/transaction banking revenues rose on volume growth and higher fees. This segment contributed 22% of total adjusted net income. 5. Corporate and Other: Reported a net loss of $100 million in Q1 2026, compared to a net loss of $60 million in the prior year, impacted by unusual items affecting both revenues and expenses.

Risks & headwinds

- Ongoing geopolitical tensions, trade developments (including USMCA negotiations), and macroeconomic uncertainty are creating a fluid operating environment, with elevated client near-term uncertainty. - 90-plus day delinquency rates for Canadian consumer portfolios increased modestly quarter-over-quarter, driven by the credit card portfolio amid elevated unemployment and ongoing economic softness. - The Canadian housing market remains soft, leading to a modest increase in the impaired loan ratio for mortgages, though CIBC notes strong loan-to-value ratios (57% for the overall mortgage book, 68% for impaired balances) and does not expect material mortgage portfolio losses. - Q1 2026 saw a small increase in impaired provisions driven by a small number of isolated impairments in Canadian and U.S. commercial banking, though management expects this elevated level to be temporary and the overall commercial portfolio remains strong. - AI deployment carries inherent regulatory and operational risk, which CIBC mitigates via built-in governance, transparency, and responsible use policies from the initial deployment stage.

Analyst Q&A

• Q: Analyst asks about medium-term ROE: with a 17.4% Q1 ROE and strong CET1 capital, why should medium-term ROE not settle between 16-17% rather than moving higher? /

  A: Management says their consistent client-focused strategy, targeted segment focus, and ongoing tech (including AI) investments position CIBC for continued premium ROE growth. They prioritize balance between ROE expansion and sustained earnings growth, avoiding short-term unnatural tweaks to boost ROE. With current capital return and capital levels, they expect ROE to continue trending higher over time through disciplined execution.

• Q: Analyst asks what drove Q1 NIM expansion between seasonality, portfolio benefits, and other factors, and how much NIM reversion should be expected this year? /

  A: Rob Sedran explains the Q1 sequential NIM uplift was split roughly evenly between hedging strategy results, positive business mix, and product margin improvements. Seasonal factors are expected to push NIM down 1-2 basis points in Q2 2026, matching historical patterns, but the long-term guidance of stable to gradually rising NIM remains unchanged after that seasonal adjustment.

• Q: Analyst asks why CIBC has outperformed peers in margin expansion over the past 18-24 months, and whether the strong growth in financial institutions lending poses future credit risk? /

  A: Management says CIBC's strategy prioritizes margin stability, with higher interest rate benefits phased in slowly, and a strategic focus on higher-margin businesses (transaction accounts, credit cards) over rapid mortgage growth has supported margins. For financial institutions lending, growth has already moderated to ~2% quarter-over-quarter, in line with the full-year high single-digit growth target. The business has strong risk guardrails, consistent risk review, and management is comfortable with the portfolio.

• Q: Analyst asks what is driving CIBC's consistent outperformance of NIM guidance, and what factors are exceeding expectations? /

  A: Management says the primary driver is more favorable business mix than initially forecast: muted mortgage market growth has shifted mix to higher-margin products like credit cards, where CIBC has seen strong growth in interest-earning revolving balances. Product margins have also been more stable than forecast, as competitive pressure has been less intense than assumed in guidance. The mix benefit is larger than the benefit from mortgage repricing, and is expected to continue supporting NIM going forward.