CIBC could endure a Canadian housing crash of up to 30%

The Canadian Imperial Bank of Commerce would suffer less than $100 million in mortgage losses even in a hypothetical 30-per-cent decline in the country’s home prices as well as an 11-per-cent upward spike in unemployment, officials said.
 
CIBC chief risk officer Laura Dottori-Attanasio noted that their calculations took into account the possibility that the losses might include some insured mortgages, the Financial Post reported.
 
Dottori-Attanasio maintained that CIBC is not alarmed by the seemingly unrestrained price growth in Canada’s most in-demand housing markets, and that the bank continues to look at residential mortgage as a “very good product”.
 
“When we look at our greater Toronto and Vancouver markets, we have better [credit] scores than the national average, lower at origination loan to values, our serious arrear rates are much lower than our overall portfolio, and so the credit quality is very high in these particular segments,” she stated.
 
“In fact, as we get worried about where the economy might be headed and the leveraged Canadian consumer, I think the area you want to look at more closely is in the unsecured product area.”
 
In an August 25 client note, Barclays Capital bank analyst John Aiken said that CIBC would be able to maintain its momentum of “impressive” growth demonstrated in the third quarter. According to officials, the bank benefited from remarkable growth in its domestic lending segment in Q3, which led to $1.4 billion ($3.61 a share) in profits for that quarter, up from $978 million ($2.42) the same time last year.
 
“This means that the earnings outlook for CM (Canadian Imperial Bank of Commerce) is likely stronger than had been anticipated by the market heading into the quarter,” Aiken wrote.
 
“However, given that the bank appears to be increasing its domestic exposure at a point when more are becoming concerned about the Canadian economy, this may somewhat dampen investors’ enthusiasm.”

Related Stories:

Dependence on real estate might cripple Canada in the long run - analysis
Canadian banks could weather a 25% home price crash – Moody’s

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