December 04, 2009
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News: CIBC; Signs of an Economic Recovery
Credit card companies are becoming more optimistic over economic recovery as delinquencies and losses begin to level out. The Canadian Imperial Bank of Commerce, one of Canada's largest credit card companies, Thursday lowered card write-off allocations of its nearly $10 billion card portfolio. In the previous second quarter, CIBC allocated $248 million for card defaults. The bank set aside $224 million for the third quarter. Canadian Imperial Bank's provisions for the bank's total outstanding loans were $424 million down from $574 million in third quarter. Total outstanding loans include secured loans such as auto and vehicle loans, mortgages, and recreational vehicle loans as well as credit card unsecured loans.
Despite the increasing credit card losses, CIBC reported a 48 percent increase in profits for fourth quarter against same time last year. The bank's stock also rose to a yearlong high closing at $70. Reduced provisions for credit card losses are a positive sign which could indicate that the economy is beginning a turn around. According to an analyst from Blackmont Capital, if the bank's calculations are correct, "the economy is going to recovery imminently." According to Statistics Canada, the Canadian economy grew at an annualized pace of 0.4 percent over the past quarter signaling that the country has pulled out its economic recession. Statistics Canada is a leader in the industry and produces statistics that help Canadians better understand the country's population, resources, economy, society, and culture
Several other major credit card companies have also lowered default provisions. President and Chief Executive Officer of Toronto-Dominion Bank Financial Group, W. Edmund Clark stated that the bank's provisions were lower-than-expected; however, the bank will continue to be cautious as they expect bankruptcies to increase in 2010. However, Clark expressed optimism saying that by 2011, we should experience economic recovery with increased employment opportunities. Despite the positive outlook, some analysts remain pessimistic saying that with such uncertainty over the past year in the financial industry, there is no way to predict the future.