Canadian Imperial Bank of Commerce's last two U.S. wealth-management acquisitions offer a "good range" of the size of the lender's appetite for future deals, Chief Executive Officer Gerald McCaughey said.
CIBC on April 11 agreed to buy Atlantic Trust Private Wealth Management from Invesco Ltd. for $210 million to expand its business in the U.S. The agreement follows its August 2011 purchase of a 41 percent stake in American Century Investments for $848 million.
"American Century and Atlantic Trust would provide a good range for what we're looking at," McCaughey, 57, said today in an interview following the Toronto-based bank's annual investors meeting in Ottawa. "One could vary somewhat, but we don't expect to surprise the market."
CIBC, the nation's fifth-biggest lender, has sought to expand in wealth management through takeovers, including an August agreement to buy MFS McLean Budden's private wealth business. The bank seeks to have wealth management represent 15 percent of earnings, compared with about 10 percent last year.
"In order to achieve that 15 percent level, we will have to engage in acquisitions," McCaughey said. CIBC's "primary emphasis is in the United States, with asset management and private wealth management being the two key areas."
CIBC got 68 percent of its profit last year from retail and business banking, according to financial statements. McCaughey said he doesn't believe CIBC's reliance on consumer lending makes the bank vulnerable, even as Canada's economy slows, the housing market cools and Canadians are urged to curb borrowing.
"Our retail business is in the best marketplace in the world today," McCaughey said. "The underpinnings are good and we think therefore that CIBC has one of the best positions in terms of a lower-risk bank."
Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney have warned consumers that mounting household debt poses a risk to the financial system and economy, which had its worst six-month performance since 2009 in the second half of 2012.
CIBC has been reorganizing its consumer-lending business to shift from using mortgage brokers. The bank is instead selling higher-margin home loans and other financial products through branches, a move that included winding down its FirstLine Mortgages broker business last year.
McCaughey said CIBC is ahead of target renewing FirstLine mortgages into more profitable CIBC-branded home loans.
"Our estimates were that we could renew approximately 25 percent, and we're running consistently ahead of that," McCaughey said.
