CIBC Reports Rising Mortgage Arrears but Strong Profit Gains
CIBC has been in the spotlight this week after releasing its third-quarter earnings, and the story is a bit of a mixed picture. On one hand, mortgage arrears are creeping up in Toronto and Vancouver. On the other, the bank posted stronger-than-expected profits and remains confident that actual losses are unlikely. Let’s break down what this means.
The bank acknowledged that more borrowers in Toronto and Vancouver are now falling behind on their mortgages, mainly because of higher unemployment, steeper borrowing costs, and sluggish housing sales. Specifically, CIBC’s 90-day mortgage delinquency rate ticked up to 0.36% in the third quarter, compared with 0.33% last quarter and 0.30% a year earlier. In uninsured mortgages, arrears rose slightly higher, with Toronto at 0.44% and Vancouver at 0.36%, marking the highest rates among Canadian regions.
That sounds concerning at first, but here’s the key point: despite the uptick in arrears, actual loan losses remain extremely low. Mortgage write-offs stayed below 0.01%, and most borrowers still hold significant equity in their homes. On average, loan-to-value ratios were in the mid-50% range nationally, and even lower in Vancouver. That cushion gives the bank confidence that clients can weather these challenges without triggering widespread defaults.
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Financially, CIBC had a strong quarter. Adjusted net income hit $2.1 billion, up 11% from last year, or $2.16 per share—beating analyst expectations. Canadian personal and business banking was a standout performer, reporting a 17% increase in profit. Commercial banking and wealth management were also up 19%. Provisions for credit losses actually dropped from the prior quarter, signaling that the bank feels reasonably secure about the quality of its loan book.
Outgoing CEO Victor Dodig reassured analysts that the credit portfolio is resilient and performing better than the bank’s original guidance. Similarly, Chief Risk Officer Frank Guse stressed that the rise in arrears was anticipated and remains manageable. Looking ahead, renewal risk—when homeowners face higher payments as mortgages reset—is expected to be limited. Even under renewal rates of 4.0–4.5%, average payment increases are projected to stay under 1.6% of client income.
The bank also highlighted its shift toward building deeper client relationships instead of chasing volume with discounted mortgage rates. Nearly 80% of mortgage clients now have a chequing account with CIBC, and more than 90% hold at least one other product. This strategy has lifted margins and reduced the bank’s reliance on low-margin mortgage lending.
CIBC’s share price has rallied strongly this year, even allowing it to surpass Scotiabank in market capitalization to become Canada’s fourth most valuable bank. While challenges in housing markets persist, CIBC appears confident it has the capital strength, risk controls, and client loyalty to ride out the turbulence.
So, while arrears are inching higher in Toronto and Vancouver, the overall takeaway is this: the bank’s profits are growing, its credit portfolio remains solid, and the risks, though real, are being carefully managed.
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