Fitch Ratings Reaffirms CIBC’s Ratings
Fitch Ratings has confirmed the Canadian Imperial Bank of Commerce’s (CIBC) Long-Term Issuer Default Rating (IDR) at ‘AA-‘ and Short-Term IDR at ‘F1+’, maintaining a stable outlook. This affirmation extends to CIBC’s subsidiaries, including CIBC Bank USA, CIBC Capital Markets (Europe) S.A., CIBC World Markets Limited, CIBC Capital Trust, and Canadian Imperial Holdings, Inc.
Strong Market Position and Diversified Model
CIBC, Canada’s fifth-largest bank, boasts a diversified business model and a strong foothold in the Canadian affluent mass market. The bank’s commercial banking and wealth management segments significantly contribute to its success. Residential mortgages, which constitute about 50% of CIBC’s loan portfolio, highlight the bank’s notable concentration in this area compared to its peers.
Domestic Focus and Loan Growth
Heavily influenced by its Canadian operations, CIBC generates most of its assets and earnings domestically. The bank’s loan growth exceeded its peers during the pandemic, albeit slowing in 2024. By the second quarter of 2025, CIBC’s loan portfolio experienced a 6% year-on-year growth, aligning with industry norms.
Impact of US Tariffs and Economic Environment
Although the direct effect of US tariffs on CIBC’s commercial and corporate loans may be less than its peers, the bank could face challenges from a weakened Canadian economy due to its greater exposure to Canadian consumers. To counter potential risks, CIBC is scrutinizing its portfolio for sectors directly impacted by tariffs and devising risk mitigation strategies.
Non-Performing Loans and Sector Focus
CIBC’s gross non-performing loan ratio increased to 57 basis points by the second quarter of 2025, up from 52 basis points in prior years. Most of these loans reside in the consumer portfolio, especially mortgages. However, the low loan-to-value ratios suggest limited potential losses. The bank has successfully restructured its US commercial real estate portfolio, shifting focus from office to the commercial and industrial sectors.
Profitability and Market Volatility
Throughout 2024, CIBC maintained profitability improvements, driven by swift resolutions of US commercial real estate distressed loans and various efficiency initiatives. Like its peers, CIBC saw a rise in trading income in early 2025 due to market volatility related to tariff uncertainties. However, this trend is expected to normalize, and capital market outcomes should stabilize.
Capital and Deposit Metrics
To address tariff risks, CIBC increased performing provisions amidst deteriorating base case indicators. As in the broader industry, further provision increases are anticipated for the rest of 2025. CIBC’s CET1 ratio remains robust at 13.4% in the second quarter of 2025, surpassing the regulatory minimum of 11.5%. The bank intends to maintain a buffer of at least 75 to 100 basis points above regulatory requirements to support organic growth, potentially increasing this buffer if economic uncertainties persist.
CIBC’s loan-to-deposit ratio stood at 101% as of the second quarter of 2025, aligning with peer averages. The bank continues to witness steady deposit growth in its Canadian and US operations, underpinned by a large retail customer deposit base and diversified wholesale funding channels.
Rating Outlook and Considerations
Fitch does not foresee a rating upgrade in the near term due to its assessment of the Canadian operating environment. A positive reassessment would necessitate a sustained reduction in vulnerabilities related to Canadian household indebtedness and high house prices. Conversely, negative rating pressure could emerge if residential mortgage concentration exceeds 60% of gross loans, non-performing loans surpass 1% of gross loans, the CET1 ratio consistently approaches or falls below 12%, or if there are significant trading, behavioral, or operational losses.
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