CIBC plans to shuffle executives, cut 2,000 jobs as it aims to improve mortgage loans, control expenses

The CIBC board of directors will review the plans for leadership changes and job cuts when it meets early next week before the company’s earnings published Wednesday.

Christopher Katsarov / The Globe and Mail

The Canadian Imperial Bank of Commerce is expected to make significant changes in its ranks of senior executives and announce about 2,000 job cuts when reporting fiscal gains for the first quarter next week, according to sources familiar with the plan.

The restructuring at the top of Canada’s fifth largest bank will mark the beginning of new leadership for its low-performing retail banking division and in key functions such as risk and technology. CIBC is under increasing pressure from investors to better control rising expenses and to boost the growth of mortgage loans, a key source of income for the bank that has stagnated over the past year.

Multiple sources said that CIBC plans to move Christina Kramer, director of personal and small business banking, to a new role as director of technology and operations. The current director of risks, Laura Dottori-Attanasio, will take Ms. Kramer’s place at the head of the retail banking division. The Globe and Mail does not identify the sources because they are not authorized to discuss the bank’s plans.

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Kramer will succeed Kevin Patterson, the current chief of technology and operations of the group, who previously announced that he would retire this year.

CIBC spokesman Tom Wallis declined to comment on leadership changes or job losses.

The CIBC board of directors will review the plans for leadership changes and job cuts when it meets early next week before the company’s earnings published Wednesday.

The executive director, Victor Dodig, has told staff to expect layoffs in the coming months as CIBC undertakes a new wave of cost control measures, but did not specify how many jobs would be lost. In an internal memo on January 30, Dodig said that while CIBC has made “steady progress” in improving its efficiency index, which measures revenue-related expenses, from 60.4% in 2015 to 55 , 5% at the end of 2019, “We have work to do to further reduce this proportion.”

Mr. Dodig also highlighted efforts “to simplify the bank and work differently” and to “expedite decision making.”

The planned job cuts would amount to more than 4 percent of CIBC’s total staff, since the bank had 45,157 full-time equivalent employees as of October 31, compared with 44,220 a year earlier. That would be comparable in scale to the Bank of Montreal’s plan to cut around 5 percent of its workforce, announced last December.

Steve Theriault, an analyst at Eight Capital Corp., said he anticipates that CIBC will register a restructuring charge next week to cover the expenses of major job cuts. “What the market thinks about that will be interesting,” he added.

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The last major change of the CIBC executive team was in mid-2017, when Dodig moved more than 40 executives to new functions, reworked the bank’s structure to combine commercial banking and wealth management in a single division, and He replaced the heads of retail banking. and wealth There have also been other important changes since then.

Michael Capatides, former administrative director and general advisor of CIBC, was appointed executive director of the CIBC US company, CIBC Bank USA, last May. And last April, Mr. Dodig’s brother, Ed Dodig, was appointed head of retail brokerage Wood Gundy in a confusion that moved his predecessor in the role, Peter Lee, to the retail bank.

With the stopping of revenue growth and uncertainty about expenses, the CIBC results are back under a microscope. In the third quarter of last year, Dodig surprised investors when he revealed that the bank’s expenses would increase between 4 and 5 percent, at a time when rivals such as the Royal Bank of Canada were withdrawing the expense in anticipation of a harder economic climate. .

“It seems that the growth of expenses is consistently high,” said Steve Belisle, senior portfolio manager at Manulife Investment Management, which owns shares in CIBC. “And at the same time, because they mishandled the growth of the mortgage in the last two years, income growth has also been deficient.”

In mid-2017, the growth rate of CIBC in its mortgage portfolio was approximately double that of its peers, increasing 13% year-over-year in the third quarter of 2017. But as CIBC tried to moderate its mortgage loans, ” put the brakes are too strong, “Dodig said at a conference last year. CIBC mortgage loans fell and became negative during much of 2019.

“While investors did not like that huge growth, they liked zero or negative growth, even less,” said John Aiken, an analyst at Barclays Capital Canada Inc., in an interview.

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With questions still pending on whether the bank will make more acquisitions to boost its banking business in the United States, investors are looking for clearer signals about CIBC’s strategy for next year. For now, CIBC shares continue trading at a strong discount compared to other large Canadian banks.

“Shout courage,” Mr. Aiken said. “But then … you kick the tires and you say, it’s fine, but why does it stand out like a sore thumb in relation to the group? And it really comes down to apathy towards strategy and a significant lack of growth in relation to the group. “

CIBC had already faced the skepticism of some investors and analysts about whether the bank has put the right senior executives in the right roles to chart a more profitable course, even before the expected management changes. “There are doubts about it and they are legitimate to some extent,” Belisle said earlier this week. “But it is up to them to prove that the market is wrong.”



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