Garnet Capital Advisors Blog

For the past several years, Canadian banks have been moving into the United States market, in an attempt to diversify beyond the natural resource- and commodity-rich Canadian economy and benefit from the recovering U.S. economy. The most recent was Canadian Imperial Bank of Commerce (CIBC), which bought Chicago-based PrivateBancorp in 2016. That move is paying off nicely for CIBC. During its fiscal first quarter, CIBC reported C$134 million ($106 million) in profit from its U.S. commercial banking and wealth management segments, versus C$29 million in the prior year’s first fiscal quarter — a sharp climb in profits

For the past several years, Canadian banks have been moving into the United States market, in an attempt to diversify beyond the natural resource- and commodity-rich Canadian economy and benefit from the recovering U.S. economy.

An increasing number of Canadian banks are moving into the U.S. to diversify.

Oh, Canada: A Move by the Nation’s Banks into the United States….

The most recent move occurred in 2016, when Canada’s fifth-largest bank, Canadian Imperial Bank of Commerce (CIBC), purchased Chicago-based PrivateBancorp. CIBC is seeking to broaden its focus from being solely a lender in Canada, and the purchase is one of its main strategies to do so.

The top five Canadian banks are facing the potential of increasing credit losses in lending to the country’s energy sector and lackluster growth due to dropping commodity prices. In the face of this scenario, the U.S. provides welcome diversification.

CIBC was preceded into the U.S. by its compatriots Royal Bank of Canada, which acquired City National Bank of Los Angeles several years ago; Bank of Montreal, which already owned Chicago’s Harris Bank and purchased one of General Electric’s finance segments recently; and Toronto-Dominion Bank, which has a robust retail presence in the U.S. Over the past three years, the latter bank has been purchasing portfolios of U.S. credit card debt as well.

One of the most successful has been CIBC, which bought Chicago-based PrivateBank.

Purchase Pays Off for CIBC

The move has paid off well for CIBC. In its first fiscal quarter, the company reported C$134 million ($106 million) in profit from its U.S. commercial banking and wealth management segments, versus C$29 million in the prior year’s first fiscal quarter — a sharp climb in profits.

That most recent quarter report was just the second one since the purchase of PrivateBank.

Kevin Glass, CIBC’s chief financial officer, noted that not only is the performance of PrivateBank strong but that it is anticipated to expand in the future. 

Right now, business in the United States contributes 14% of CIBC’s total earnings. In three years’ time, the company expects it to contribute 17%.

Advantages of a Whole Loan Broker

As banks look to diversify from focused lending streams and shrinking economies, they may need to invest in high-quality loan assets. 

Canadian banks are increasingly investing in United States domestic assets to mitigate risk from too much narrow exposure and to broaden their investment and lending horizons. Seasoned loan brokers at Garnet Capital can help Canadian banks — indeed, any banks — invest in superior quality loan assets to maximize their portfolios.

For more on risk mitigation and maximizing portfolios, sign up for our newsletter.