{"id":1561,"date":"2007-12-06T13:02:30","date_gmt":"2007-12-06T17:02:30","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1561"},"modified":"2007-12-06T13:02:30","modified_gmt":"2007-12-06T17:02:30","slug":"cm-tier-1-capital-october-2007","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1561","title":{"rendered":"CM Tier 1 Capital : October 2007"},"content":{"rendered":"

The Canadian Imperial Bank of Commerce has released its Fourth Quarter Supplementary Information<\/a>;\u00a0I will analyze this in the same format as was has been recently done for RY<\/a>, NA<\/a>, TD<\/a> and BMO<\/a>.<\/p>\n

Step One is to analyze their Tier 1 Capital, reproducing the summary produced last year<\/a>:<\/p>\n

\n\n\n\n\n\n\n\n\n\n
CM\u00a0Capital Structure
\nOctober, 2007
\n& October 2006<\/td>\n<\/tr>\n
\u00a0<\/td>\n2007<\/td>\n2006<\/td>\n<\/tr>\n
Total Tier 1 Capital<\/td>\n12,379<\/td>\n11,935<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n90.1%<\/td>\n83.2%<\/td>\n<\/tr>\n
Preferred Shares<\/td>\n23.7%<\/td>\n25.0%<\/td>\n<\/tr>\n
Innovative Tier 1 Capital Instruments<\/td>\n0%<\/td>\n0%<\/td>\n<\/tr>\n
Non-Controlling Interests in Subsidiaries<\/td>\n1.1%<\/td>\n0%<\/td>\n<\/tr>\n
Goodwill<\/td>\n-14.9%<\/td>\n-8.2%<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Next, the issuance capacity (from Part 3\u00a0of last year’s series<\/a>):<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
CM
\nTier 1 Issuance Capacity
\nOctober 2007
\n& October 2006<\/td>\n<\/tr>\n
\u00a0<\/td>\n2007<\/td>\n2006<\/td>\n<\/tr>\n
Equity Capital<\/td>\n(A)<\/td>\n9,448<\/td>\n8,954<\/td>\n<\/tr>\n
Non-Equity Tier 1 Limit<\/td>\n(B=A\/3)<\/td>\n3,149<\/td>\n2,985<\/td>\n<\/tr>\n
Innovative Tier 1 Capital<\/td>\n(C)<\/td>\n0<\/td>\n0<\/td>\n<\/tr>\n
Preferred Limit<\/td>\n(D=B-C)<\/td>\n3,149<\/td>\n2,985<\/td>\n<\/tr>\n
Preferred Y\/E Actual<\/td>\n(E)<\/td>\n2,931<\/td>\n2,981<\/td>\n<\/tr>\n
New Issuance Capacity<\/td>\n(F=D-E)<\/td>\n218<\/td>\n4<\/td>\n<\/tr>\n
Items A, C & E are taken from the table
\n“Regulatory Capital”
\nof the supplementary information;
\nNote that Item A includes Goodwill and non-controlling interest
\n<\/em>Item B is as per OSFI Guidelines
\n<\/em>Items D & F are my calculations.<\/em><\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

We can now show the all important Risk-Weighted Asset Ratios!<\/p>\n

\n\n\n\n\n\n\n\n\n\n
CM
\nRisk-Weighted Asset Ratios
\nOctober 2007
\n& October 2006<\/td>\n<\/tr>\n
\u00a0<\/td>\nNote<\/td>\n2007<\/td>\n2006<\/td>\n<\/tr>\n
Equity Capital<\/td>\nA<\/td>\n9,448<\/td>\n8,954<\/td>\n<\/tr>\n
Risk-Weighted Assets<\/td>\nB<\/td>\n127,424<\/td>\n114,780<\/td>\n<\/tr>\n
Equity\/RWA<\/td>\nC=A\/B<\/td>\n7.41%<\/td>\n7.80%<\/td>\n<\/tr>\n
Tier 1 Ratio<\/td>\nD<\/td>\n9.7%<\/td>\n10.4%<\/td>\n<\/tr>\n
Capital Ratio<\/td>\nE<\/td>\n13.9%<\/td>\n14.5%<\/td>\n<\/tr>\n
A is taken from the table “Issuance Capacity”, above
\nB, D & E are taken from the Supplementary Report
\nC is my calculation.<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Note that, as with all banks examined thus far, the Equity\/RWA ratio and Tier 1 Ratio have both deteriorated over the year; for\u00a0CM,\u00a0NA and RY the Total Capital Ratio has also declined. CM’s Subordinated Debt<\/a> outstanding has actually declined over the past year.<\/p>\n

The acquisition of FirstCarribean in the first quarter<\/a> complicates the task of tracing changes in capital; but I think it’s fair to say – as a ballpark approximation –\u00a0that the change in Total Capital is due to retention of earnings rather than issuance of new capital instruments.<\/p>\n

It is disappointing to see the deterioration in the Equity\/RWA ratio over the year – I consider this to be a measure of the safety of the preferred shares, as it is the “total risk” of the bank’s assets (as defined by the regulators) divided by the value of capital junior to preferreds (which therefore takes the first loss). It is by no means anything to lose a lot of sleep over, as it still remains strong – the preferreds are better protected than the sub-debt of a lot of global banks – but … geez, the direction’s wrong!<\/p>\n

I won’t discuss the annual results to any great extent – there will be innumerable reports over the next few months released by analysts with a great deal more time to spend on the matter than I have.\n<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The Canadian Imperial Bank of Commerce has released its Fourth Quarter Supplementary Information;\u00a0I will analyze this in the same format as was has been recently done for RY, NA, TD and BMO. Step One is …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":["post-1561","post","type-post","status-publish","format-standard","hentry","category-regulatory-capital"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1561","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1561"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1561\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1561"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1561"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1561"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}