CM Capitalization: 3Q08

CIBC (Stock symbol CM … I can never quite decide how to present it!) has released its Third Quarter 2008 Report and Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!

Step One is to analyze their Tier 1 Capital, reproducing the prior format:

CM Capital Structure
October, 2007
& July, 2008
  4Q07 3Q08
Total Tier 1 Capital 12,379 11,626
Common Shareholders’ Equity 90.1% 92.7%
Preferred Shares 23.7% 25.2%
Innovative Tier 1 Capital Instruments 0% 0%
Non-Controlling Interests in Subsidiaries 1.1% 1.3%
Goodwill -14.9% -16.6%
Misc. NA -2.6%
‘Misc.’ is comprised of Basel II adjustments to Tier 1 Equity

Next, the issuance capacity (from Part 3 of the introductory series):

Tier 1 Issuance Capacity
October 2007
& July 2008
  4Q07 3Q08
Equity Capital (A) 9,448 8,695
Non-Equity Tier 1 Limit (B=A/3), 4Q07
(B=0.428*A), 3Q08
3,149 3,721
Innovative Tier 1 Capital (C) 0 0
Preferred Limit (D=B-C) 3,149 3,721
Preferred Actual (E) 2,931 2,931
New Issuance Capacity (F=D-E) 218 790
Items A, C & E are taken from the table
“Regulatory Capital”
of the supplementary information;
Note that Item A includes Goodwill, FX losses, non-controlling interest, Gains on sale of securitizations and 50/50 deductions

Item B is as per OSFI Guidelines; the limit was recently increased.
Items D & F are my calculations

and the all important Risk-Weighted Asset Ratios!

Risk-Weighted Asset Ratios
October 2007
& July 2008
  Note 4Q07 3Q08
Equity Capital A 9,448 8,695
Risk-Weighted Assets B 127,424 118,500
Equity/RWA C=A/B 7.41% 7.33%
Tier 1 Ratio D 9.7% 9.8%
Capital Ratio E 13.9% 14.4%
Assets to Capital Multiple F 19.0x 17.7x
A is taken from the table “Issuance Capacity”, above
B, D & E are taken from CM’s Supplementary Report
C is my calculation.
F is from Page 26 of the quarterly report
Note that CM reports “Common Equity to risk-weighted assets” of 9.1%. They do not include “non-controlling interests”, “goodwill” and the Basel II adjustments in the numerator; I do.

Again, the 4Q07 figures are not directly comparable with the 3Q08 figures due to the change from Basel I to Basel II.

On a Basel I basis, the Tier I and Total Capital ratios got a big boost in the first quarter with the capital raise, but have since declined; the Tier 1 ratio is now the lowest it has been in the last two years, but the total capital ratio has improved since the second quarter. The improvement in the total capital ratio over the quarter may be attributed to issues of sub-debt.

Further, on a Basel I basis, Total Risk Weighted Assets have increased somewhat since 4Q07, basically due to an increase of $5-billion in the risk-weight of “Other Loans”. It is not entirely clear what these other loans are; the balance sheet amounts for Personal Loans and Credit Card Loans are up $2.2-billion and $1.4-billion, respectively, but that doesn’t account for the increase. It may possibly be the risk weighting that has changed rather than the unadjusted balance sheet value.

3 Responses to “CM Capitalization: 3Q08”

  1. cowboylutrell says:

    Talking of CIBC, they will issue preferred shares @ 5.35% for gross proceeds of $225 million:

Leave a Reply

You must be logged in to post a comment.