Canadian Imperial Bank of Commerce

Good morning. Welcome to the CIBC quarterly financial results call. Please be advised that this call is being recorded. I would like to turn the meeting over to Jeff Weiss, Senior Vice President, Investor Relations. Please go ahead, Jeff.

Thank you, and good morning. We will begin this morning's presentation with opening remarks from Victor Dodig, our President and Chief Executive Officer. Following Victor, Raj Panosian, our Chief Financial Officer, will review our operating results. Sean Bieber, our Chief Risk Officer, will close out the prepared remarks with a risk management update. We are also joined in the room by CIDC's business leaders, including Harry Cullum, Laura Vittori Atanasio, and John Hantalis, as well as Mike Capitides, who has joined us remotely from the U.S. They will be available to take questions following the prepared remarks. As noted on slide two of our investor presentation, Our comments may contain forward-looking statements which involve assumptions that have inherent risks and uncertainties. Actual results may differ materially. With that, I will now turn the meeting over to Victor.

Thank you, Jeff, and good morning. I hope everyone joining us on the call, including your families and colleagues, are well. And to those on the front lines providing essential services for health care and economic recovery, we'd like to thank you for your courage and for your dedication. I'd like to begin the call by underscoring three essential factors that guide our thinking about our bank and the current environment and as we look to the future. First, we're well positioned to balance the short-term actions necessary to successfully navigate the current challenges as well as advance our long-term strategy. We continue to make strategic investments now to position us for success as we enter the recovery period and beyond. Second, Our investments over the past several years to modernize and simplify our bank have allowed us to mobilize early and to respond quickly to the pandemic in support of our clients, our team members, and the communities we serve. Third, whether you're building client relationships or managing a public health crisis, your success often rests on your people and their leadership. Our CIBC team has stepped up in remarkable ways over the past several months, And it is reinforced that we have a singularly connected team that is bringing a relentless focus on our clients. For our bank, we are leaning in to support our clients at a time when they need our help more than ever, while also ensuring the well-being of our team. Since mid-March, we've enabled over 75% of our employees to work remotely, tripling the number from a few months ago. We've also taken significant actions to ensure the well-being of our team members required to work on site as they support our clients and keep our operations running smoothly. For our clients, we have helped over half a million personal, business, and corporate clients facing financial hardships, which including payment deferrals on loans, mortgages, and other credit products, as well as reduced interest rates on credit cards. And we're directly supporting government stimulus programs that have been launched for individuals and businesses in both Canada and the United States. In addition, our industry-leading mobile banking platform and online capabilities have served us well, as more of our clients adopt digital channels to perform their day-to-day banking. This level of digital engagement will become entrenched behavior and the new normal in a post-COVID world. We're well positioned for that new normal, and we'll continue to invest in digital to advance our lead. Now, it's important to provide some context on why these numbers and these measures are important. We've consistently acted with the long-term in mind when it comes to client relationships. That's been a driver of our strategy and our investments in recent years. As I've said before, this is our moment of truth on that journey, where we have executed decisively in our long-term vision in the midst of a crisis. When we needed to be reactive to meet the urgent need for financial relief among clients, we made it as easy as possible for them to get help such as creating a simple online form to request a payment deferral and building a seamless application process for the Canada Emergency Business Account Loans in Canada and the Paycheck Protection Program in the United States. We've also taken every opportunity to be proactive, particularly in light of the sharp increase in the need for advice. Our team has called hundreds and thousands of clients offering advice or just checking in to ensure their banking is in order. We were the first bank to institute a Your Next policy to serve seniors and persons with disabilities in our banking centers. We also proactively extended payment relief to clients who we identified as needing short-term support. And we've been highly visible with our commercial and corporate clients, helping them navigate these challenging markets. These are investments in the bank we're building as one connected team, CIBC. It's a long-term effort. but we're seeing continued signs of progress. Earlier this month, J.D. Power released their 2020 Canadian Retail Banking Satisfaction Study for the Big Five banks, and CIBC moved up another rank to third this year. That has been a consistent trend for us. We knew when we set out to improve our client experience scores that it would take time, but our progress has been steady, and our unwavering commitment to our clients is being recognized. In addition to helping our clients through this crisis, we continue to support the communities where we live and work. We've increased donations to charities that directly support those most at risk. And more recently, we announced a bursary fund to support the education of the next generation of health care workers. Now, with that context, I will review the highlights of our second quarter results. While the results for the quarter were stable on a pre-provision basis, the changes in the economic backdrop that began in March had a material impact on our provision for credit losses. Pre-provision earnings of $1.9 billion reflect the resilience of our core business, despite these challenging times. Including the impact of the $1.4 billion provision for credit losses, adjusted earnings were $441 million, resulting in earnings per share of 94 cents. Our balance sheet remains strong, and it's underpinned by a solid capital position with a CET1 ratio of 11.3%. Looking at our business units, COVID-19 has significantly impacted consumer behavior, which has materially affected our results. In personal and business banking, transaction volumes across payment products have declined significantly since social distancing protocols were implemented. These trends negatively impacted fee revenue this quarter. And notwithstanding the macro challenges, we continue to see improving trends in volume growth across our core products, including mortgages and deposits. Our North American commercial and corporate banking businesses saw credit utilization increase early in the quarter as clients secured liquidity for their businesses. With a large portion of these draws retained, both loan and deposit volume growth accelerated during the quarter. In wealth management, market deteriorations that occurred largely in March reduced fees as well as retail mutual fund net sales. And in capital markets, market volatility drove higher trading activity as we supported our clients. And while new equity issuance slowed, We had a record quarter in debt issuance, and there continues to be a strong pipeline for both government and municipal paper. In closing, before I hand it over to Haraj and Sean for their remarks, I want to leave you with a few key messages. Our core franchise is strong, and while economic headwinds are likely to be here for the near term, our client focus and our well-diversified business will allow us to get back to pre-COVID levels of profitability as the recovery takes hold. In addition, While there are many unknowns related to the pandemic, its effect on the economy and the path to recovery, what is certain is that our strong capital liquidity will allow us to withstand ongoing stress, will continue to support our clients and protect our dividend for our shareholders. And finally, disruption creates opportunity. We are continuing to invest for the long term with an eye to our strengths in technology and innovation, as well as in building relationships so that we emerge on the other side as a stronger bank. We've already fast-tracked some of our investments in technology to support digital engagement, as well as working remotely, and we will continue to review other areas of our business to adapt and develop competitive advantages in this new normal environment. We have a talented leadership team who, along with our entire CIBC team, has stepped up to the challenge. And with that, I'll turn the call over to Haraj for a detailed review of our financial results. Over to you, Haraj.