(Reuters) -Canadian Imperial Bank of Commerce (CIBC) reported a fall in its first-quarter profit on Friday, weighed down by higher provisions and legal charges to settle a lawsuit tied to the 2008 global financial crisis.
CIBC set aside C$295 million ($217.17 million) in provisions for credit losses in the reported quarter, up C$220 million from a year-ago period.
A rising interest rate environment has helped banks’ lending units, which can charge borrowers more on loans, although it has also pushed banks to start bracing for increased odds of more loan defaults.
Canada’s central bank over the past 11 months has lifted interest rates at a record pace to 4.5% to tame inflation, which was 6.3% in December, still well above the bank’s 2% target. Last month, Bank of Canada said it would hold off on further moves to let the effects of past rate hikes sink in.
CIBC kicked off the first-quarter earnings season for major Canadian banks on Friday. It posted an overall net profit of C$432 million, or C$0.39 per share, compared with C$1.87 billion, or C$2.01 per share, seen a year ago.
The bank saw a 14% decline in its personal and business banking that was partly offset by a 13% jump in its capital markets unit.
It also recorded a pretax charge of C$1.17 billion, representing $855 million of damages and interest through Jan. 31.
Last week, the Toronto-based company said it would pay $770 million to a vehicle controlled by private-equity firm Cerberus Capital Management to resolve the lawsuit related to the financial crisis.
The dispute stemmed from a complex 2008 transaction in which CIBC made payments to a Cerberus entity in exchange for a loan to reduce the bank’s exposure to U.S. residential real estate.
Rivals Bank of Montreal and Bank of Nova Scotia will report on Tuesday while Royal Bank of Canada and National Bank of Canada will post their earnings on Wednesday.
($1 = 1.3584 Canadian dollars)
(Reporting by Jaiveer Shekhawat and Mehnaz Yasmin in Bengaluru; Editing by Sherry Jacob-Phillips)
