CIBC Announces Second Quarter 2014 Results

TORONTO, May 29, 2014 /CNW/ - CIBC (TSX: CM) (NYSE: CM) today announced its financial results for the second quarter ended April 30, 2014.

Second quarter highlights:

  • Reported net income was $306 million, compared with $862 million for the second quarter a year ago, and $1,177 million for the prior quarter.
  • Adjusted net income(1) was $887 million, compared with $862 million for the second quarter a year ago, and $951 million for the prior quarter.
  • Reported diluted earnings per share (EPS) was $0.73, compared with $2.09 for the second quarter a year ago, and $2.88 for the prior quarter.
  • Adjusted diluted EPS(1) was $2.17, compared with $2.09 for the second quarter a year ago, and $2.31 for the prior quarter.
  • Reported return on common shareholders' equity (ROE) was 7.0% and adjusted ROE(1) was 20.6%.

Results for the second quarter of 2014 were affected by the following items of note aggregating to a negative impact of $1.44 per share:

  • $543 million ($543 million after-tax, or $1.34 per share) of charges relating to FirstCaribbean International Bank Limited (CIBC FirstCaribbean), comprising a non-cash goodwill impairment charge of $420 million ($420 million after-tax) and loan losses of $123 million ($123 million after-tax), reflecting revised expectations on the extent and timing of the anticipated economic recovery in the Caribbean region;
  • $22 million ($16 million after-tax, or $0.04 per share) expenses relating to the development of our enhanced travel rewards program and in respect of the Aeroplan transactions with Aimia Canada Inc. (Aimia) and The Toronto-Dominion Bank (TD);
  • $22 million ($12 million after-tax, or $0.03 per share) loan losses in our exited U.S. leveraged finance portfolio;
  • $9 million ($7 million after-tax, or $0.02 per share) amortization of intangible assets; and
  • $4 million ($3 million after-tax, or $0.01 per share) loss from the structured credit run-off business.

CIBC's Basel III Common Equity Tier 1 ratio at April 30, 2014 was 10.0%, and our Tier 1 and Total capital ratios were 12.1% and 14.9%, respectively, on an all-in basis compared with Basel III Common Equity Tier 1 ratio of 9.5%, Tier 1 capital ratio of 11.5% and Total capital ratio of 14.2% in the prior quarter.

CIBC announced a quarterly dividend increase of 2 cents per common share to $1.00 per share.

"In the quarter, CIBC's core businesses delivered solid results, reflecting our strong focus on clients," says Gerald T. McCaughey, CIBC President and Chief Executive Officer. "The strength of our underlying fundamentals allows us to generate strong and consistent returns for our shareholders."

Core business performance

Retail and Business Banking reported net income of $546 million for the second quarter, down $26 million or 5% from the second quarter a year ago. Adjusting for the items of note shown above, adjusted net income(1) was $563 million, down $10 million or 2% from the second quarter a year ago as a result of lower cards revenue due to the Aeroplan transactions with Aimia and TD, partially offset by volume growth across most products and lower loan losses.

During the second quarter of 2014, Retail and Business Banking continued to make progress against our objectives of accelerating profitable revenue growth and enhancing the client experience:

  • We were the first bank in Canada to launch eDeposit™ for business banking clients, enabling them to quickly scan, securely upload and deposit a large number of cheques in a single transaction using a desktop cheque scanner;
  • We opened our first CIBC location at Pearson Airport - part of an innovative new partnership with the Greater Toronto Airports Authority as the exclusive Financial Institution sponsor at Canada's largest airport; and
  • Sales of CIBC's Aventura® Travel rewards credit cards remained strong and have already exceeded expectations for the full year.

Wealth Management reported net income of $117 million for the second quarter, up $26 million or 29% from the second quarter a year ago.

Revenue of $548 million was up $105 million or 24% compared with the second quarter of 2013. This was primarily due to higher client assets under management driven by market appreciation and net sales of long-term mutual funds, higher fee-based and commission revenue, the acquisition of Atlantic Trust and higher contribution from our stake in American Century Investments.

During the second quarter of 2014, Wealth Management continued its progress in support of our strategic priority to build our wealth management platform:

  • We achieved our 21st consecutive quarter of positive net retail sales of long-term mutual funds;
  • CIBC Wood Gundy client satisfaction continued to strengthen with an overall rating of 91%, which is among the industry leaders; and
  • The Atlantic Trust integration has progressed well and overall net flows continue to be solid.

Wholesale Banking reported net income of $213 million for the second quarter, down $51 million or 19% from the prior quarter. Excluding items of note, adjusted net income(1) was $228 million, up $13 million or 6% from the prior quarter.

As a leading wholesale bank in Canada, active in core Canadian industries in the rest of the world, Wholesale Banking acted as:

  • Joint bookrunner for Enbridge Inc.'s $1.4 billion three-tranche offering of Medium Term Notes;
  • Lead manager for a $300 million 10-year offering by the Province of Manitoba;
  • Joint bookrunner on PIMCO Global Income Opportunities Fund's $690 million unit offering;
  • Joint bookrunner and co-lead arranger on US$2.5 billion in credit facilities related to the acquisition of any or all of the outstanding shares of Brookfield Office Properties Inc. by Brookfield Property Partners L.P. and its indirect subsidiaries; and
  • Financial advisor to the Special Committee of Atrium Innovations on its sale to Permira Holdings for US$966 million.

"In summary, our businesses performed well this quarter," says Mr. McCaughey. "We continued to execute our growth strategy and remain focused on deepening client relationships to deliver consistent and sustainable earnings growth."

Making a difference in our Communities
CIBC is committed to supporting causes that matter to our clients, our employees and our communities. During the quarter we:

  • Committed $2 million to support the next generation of leaders through scholarships and diversity education at Rotman School of Management, Richard Ivey School of Business and HEC Montréal;
  • Announced donations of $1.65 million to support those affected by cancer, including $1 million towards pediatric oncology at CHU Sainte-Justine Hospital in Montréal; and
  • Hosted Welcome Home events in our branches for our Sochi 2014 Paralympians, as Premier Partner of the Canadian Paralympic Team.

During the quarter CIBC was named:

  • One of the 50 Most Engaged Workplaces in Canada by Achievers;
  • One of Canada's Best Diversity Employers 2014 by Mediacorp; and
  • A Top Employer for Canadians over 40 by Mediacorp.

In addition:

  • CIBC was recognized for the best mobile banking offer among the big 5 Canadian banks by Forrester Research; and
  • CIBC won multiple awards for Project Finance from Project Finance Magazine and Project Finance International Magazine.

(1) For additional information, see the "Non-GAAP measures" section.

The information on the following pages forms a part of this press release.

(The board of directors of CIBC reviewed this press release prior to it being issued. CIBC's controls and procedures support the ability of the President and Chief Executive Officer and the Chief Financial Officer of CIBC to certify CIBC's second quarter financial report and controls and procedures. CIBC's CEO and CFO will voluntarily provide to the Securities and Exchange Commission a certification relating to CIBC's second quarter financial information, including the attached unaudited interim consolidated financial statements, and will provide the same certification to the Canadian Securities Administrators.)

Management's discussion and analysis

Management's discussion and analysis (MD&A) is provided to enable readers to assess CIBC's financial condition and results of operations as at and for the quarter and six months ended April 30, 2014, compared with corresponding periods. The MD&A should be read in conjunction with our 2013 Annual Report and the unaudited interim consolidated financial statements included in this report. Unless otherwise indicated, all financial information in this MD&A has been prepared in accordance with International Financial Reporting Standards (IFRS or GAAP) and all amounts are expressed in Canadian dollars. This MD&A is current as of May 28, 2014. Additional information relating to CIBC is available on SEDAR at www.sedar.com and on the U.S. Securities and Exchange Commission's (SEC) website at www.sec.gov. No information on CIBC's website (www.cibc.com) should be considered incorporated herein by reference. A glossary of terms used throughout this quarterly report can be found on pages 164 to 168 of our 2013 Annual Report.

A NOTE ABOUT FORWARD-LOOKING STATEMENTS: From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including in this report, in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission and in other communications. All such statements are made pursuant to the "safe harbour" provisions of, and are intended to be forward-looking statements under applicable Canadian and U.S. securities legislation, including the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements made in the "External reporting changes", "Overview - Financial results", "Overview - Significant events", "Overview - Outlook for calendar year 2014", "Strategic business units overview - Business unit allocations", "Financial condition - Capital resources", "Management of risk - Risk overview", "Management of risk - Credit risk", "Management of risk - Market risk", "Management of risk - Liquidity risk", "Accounting and control matters - Critical accounting policies and estimates", "Accounting and control matters - Regulatory developments" and "Accounting and control matters - Controls and procedures" sections of this report and other statements about our operations, business lines, financial condition, risk management, priorities, targets, ongoing objectives, strategies and outlook for calendar year 2014 and subsequent periods. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "forecast", "target", "objective" and other similar expressions or future or conditional verbs such as "will", "should", "would" and "could". By their nature, these statements require us to make assumptions, including the economic assumptions set out in the "Overview - Outlook for calendar year 2014" section of this report, and are subject to inherent risks and uncertainties that may be general or specific. A variety of factors, many of which are beyond our control, affect our operations, performance and results, and could cause actual results to differ materially from the expectations expressed in any of our forward-looking statements. These factors include: credit, market, liquidity, strategic, insurance, operational, reputation and legal, regulatory and environmental risk; the effectiveness and adequacy of our risk management and valuation models and processes; legislative or regulatory developments in the jurisdictions where we operate, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations issued and to be issued thereunder, the Basel Committee on Banking Supervision's global standards for capital and liquidity reform, and those relating to the payments system in Canada; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions, and interest rate and liquidity regulatory guidance; the resolution of legal and regulatory proceedings and related matters; the effect of changes to accounting standards, rules and interpretations; changes in our estimates of reserves and allowances; changes in tax laws; changes to our credit ratings; political conditions and developments; the possible effect on our business of international conflicts and the war on terror; natural disasters, public health emergencies, disruptions to public infrastructure and other catastrophic events; reliance on third parties to provide components of our business infrastructure; potential disruptions to our information technology systems and services, including the evolving risk of cyber attack; losses incurred as a result of internal or external fraud; the accuracy and completeness of information provided to us concerning clients and counterparties; the failure of third parties to comply with their obligations to us and our affiliates; intensifying competition from established competitors and new entrants in the financial services industry; technological change; global capital market activity; changes in monetary and economic policy; currency value and interest rate fluctuations; general business and economic conditions worldwide, as well as in Canada, the U.S. and other countries where we have operations, including increasing Canadian household debt levels, the high U.S. fiscal deficit and Europe's sovereign debt crisis; our success in developing and introducing new products and services, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels; changes in client spending and saving habits; our ability to attract and retain key employees and executives; our ability to successfully execute our strategies and complete and integrate acquisitions and joint ventures; and our ability to anticipate and manage the risks associated with these factors. This list is not exhaustive of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. We do not undertake to update any forward-looking statement that is contained in this report or in other communications except as required by law.

External reporting changes

The following external reporting changes were made in the first quarter of 2014. Prior period amounts were restated accordingly.

Amendments to IAS 19 "Employee Benefits"
We adopted amendments to IAS 19 "Employee Benefits" commencing November 1, 2011, which require us to recognize: (i) actuarial gains and losses in Other comprehensive income (OCI) in the period in which they arise; (ii) interest income on plan assets in net income using the same rate as that used to discount the defined benefit obligation; and (iii) all past service costs (gains) in net income in the period in which they arise.

Adoption of IFRS 10 "Consolidated Financial Statements"
We adopted IFRS 10 "Consolidated Financial Statements" commencing November 1, 2012, which replaces IAS 27 "Consolidated and Separate Financial Statements" and Standards Interpretation Committee (SIC) - 12 "Consolidated - Special Purpose Entities". The adoption of IFRS 10 required us to deconsolidate CIBC Capital Trust from the consolidated financial statements, which resulted in a replacement of Capital Trust securities issued by CIBC Capital Trust with Business and government deposits for the senior deposit notes issued by us to CIBC Capital Trust.

Sale of Aeroplan portfolio
On December 27, 2013, we sold approximately 50 percent of our Aerogold VISA portfolio, consisting primarily of credit card only customers, to the Toronto-Dominion Bank (TD). Accordingly, the revenue related to the sold credit card portfolio was moved from Personal Banking to the Other line of business within Retail and Business Banking.

Allocation of Treasury activities
Treasury-related transfer pricing continues to be charged or credited to each line of business within our Strategic Business Units (SBUs). We changed our approach to allocating the residual financial impact of Treasury activities. Certain fees are charged directly to the lines of business, and the residual net revenue is retained in Corporate and Other.

Income statement presentation
We reclassified certain amounts associated with our self-managed credit card portfolio from Non-interest expenses to Non-interest income. There was no impact on consolidated net income due to this reclassification.

Second quarter financial highlights

            As at or for the three       As at or for the six  
          months ended       months ended  
    2014   2014   2013     2014   2013  
Unaudited   Apr. 30   Jan. 31   Apr. 30     Apr. 30   Apr. 30  
Financial results ($ millions)                                  
Net interest income   $ 1,798   $ 1,905   $ 1,822     $ 3,703   $ 3,677  
Non-interest income     1,369     1,729     1,302       3,098     2,612  
Total revenue     3,167     3,634     3,124       6,801     6,289  
Provision for credit losses     330     218     265       548     530  
Non-interest expenses     2,412     1,979     1,825       4,391     3,813  
Income before taxes     425     1,437     1,034       1,862     1,946  
Income taxes     119     260     172       379     299  
Net income   $ 306   $ 1,177   $ 862     $ 1,483   $ 1,647  
Net income (loss) attributable to non-controlling interests   $ (11)   $ 3   $ 2     $ (8)   $ 4  
    Preferred shareholders     25     25     25       50     50  
    Common shareholders     292     1,149     835       1,441     1,593  
Net income attributable to equity shareholders   $ 317   $ 1,174   $ 860     $ 1,491   $ 1,643  
Financial measures                                  
Reported efficiency ratio     76.2 %   54.5 %   58.4 %     64.6 %   60.6 %
Adjusted efficiency ratio (1)     59.6 %   56.7 %   56.9 %     58.1 %   56.7 %
Loan loss ratio     0.51 %   0.38 %   0.47 %     0.44 %   0.44 %
Reported return on common shareholders' equity     7.0 %   27.5 %   23.0 %     17.2 %   21.7 %
Adjusted return on common shareholders' equity (1)     20.6 %   22.1 %   23.0 %     21.3 %   23.0 %
Net interest margin     1.81 %   1.84 %   1.85 %     1.83 %   1.84 %
Net interest margin on average interest-earning assets     2.07 %   2.09 %   2.13 %     2.08 %   2.13 %
Return on average assets     0.31 %   1.14 %   0.88 %     0.73 %   0.82 %
Return on average interest-earning assets     0.35 %   1.29 %   1.01 %     0.83 %   0.95 %
Total shareholder return     14.05 %   (1.36) %   (2.02) %     12.51 %   4.97 %
Reported effective tax rate     28.1 %   18.1 %   16.6 %     20.4 %   15.3 %
Adjusted effective tax rate (1)     13.5 %   16.5 %   16.6 %     15.1 %   16.3 %
Common share information                                  
Per share ($) - basic earnings   $ 0.73   $ 2.88   $ 2.09     $ 3.62   $ 3.97  
  - reported diluted earnings     0.73     2.88     2.09       3.61     3.96  
  - adjusted diluted earnings (1)     2.17     2.31     2.09       4.48     4.20  
  - dividends     0.98     0.96     0.94       1.94     1.88  
  - book value     42.04     42.59     37.09       42.04     37.09  
Share price ($) - high     97.72     91.58     84.70       97.72     84.70  
  - low     85.49     86.57     77.02       85.49     76.70  
  - closing     97.72     86.57     80.57       97.72     80.57  
Shares outstanding (thousands) - weighted-average basic     397,758     398,539     400,400       398,155     401,890  
  - weighted-average diluted     398,519     399,217     400,812       398,861     402,315  
  - end of period     397,375     398,136     399,811       397,375     399,811  
Market capitalization ($ millions)     $ 38,832   $ 34,467   $ 32,213     $ 38,832   $ 32,213  
Value measures                                  
Dividend yield (based on closing share price)     4.1 %   4.4 %   4.8 %     4.0 %   4.7 %
Reported dividend payout ratio     133.5 %   33.3 %   44.9 %     53.6 %   47.3 %
Adjusted dividend payout ratio (1)     45.2 %   41.4 %   44.9 %     43.2 %   44.6 %
Market value to book value ratio     2.32     2.03     2.17       2.32     2.17  
On- and off-balance sheet information ($ millions)                                  
Cash, deposits with banks and securities   $ 77,892   $ 77,290   $ 78,363     $ 77,892   $ 78,363  
Loans and acceptances, net of allowance     258,680     256,819     252,298       258,680     252,298  
Total assets     397,102     400,955     397,219       397,102     397,219  
Deposits     314,023     314,336     309,040       314,023     309,040  
Common shareholders' equity     16,707     16,955     14,827       16,707     14,827  
Average assets     406,285     410,019     404,303       408,183     403,162  
Average interest-earning assets     356,492     361,844     350,144       359,212     348,565  
Average common shareholders' equity     17,173     16,581     14,913       16,872     14,804  
Assets under administration (2)     1,663,858     1,603,022     1,468,429       1,663,858     1,468,429  
Balance sheet quality measures                                  
All-in basis                                  
    Risk-weighted assets (RWA) ($ billions)   $ 135.9   $ 140.5   $ 125.9     $ 135.9   $ 125.9  
    Common Equity Tier 1 (CET1) ratio     10.0 %   9.5 %   9.7 %     10.0 %   9.7 %
    Tier 1 capital ratio     12.1 %   11.5 %   12.2 %     12.1 %   12.2 %
    Total capital ratio     14.9 %   14.2 %   15.5 %     14.9 %   15.5 %
Other information                                    
Full-time equivalent employees     43,907     43,573     43,057       43,907     43,057  
(1)   For additional information, see the "Non-GAAP measures" section.
(2)   Includes the full contract amount of assets under administration or custody under a 50/50 joint venture between CIBC and The Bank of New York Mellon.

Overview

Financial results
Reported net income for the quarter was $306 million, compared with $862 million for the same quarter last year and $1,177 million for the prior quarter. Reported net income for the six months ended April 30, 2014 was $1,483 million, compared with $1,647 million for the same period in 2013.

Adjusted net income(1) for the quarter was $887 million, compared with $862 million for the same quarter last year and $951 million for the prior quarter. Adjusted net income(1) for the six months ended April 30, 2014 was $1,838 million, compared with $1,744 million for the same period in 2013.

Reported diluted earnings per share (EPS) for the quarter was $0.73, compared with $2.09 for the same quarter last year and $2.88 for the prior quarter. Reported diluted EPS for the six months ended April 30, 2014 was $3.61, compared with $3.96 for the same period in 2013.

Adjusted diluted EPS(1) for the quarter was $2.17, compared with $2.09 for the same quarter last year and $2.31 for the prior quarter. Adjusted diluted EPS(1) for the six months ended April 30, 2014 was $4.48, compared with $4.20 for the same period in 2013.

Net income for the current quarter was affected by the following items of note:

  • $543 million ($543 million after-tax) of charges relating to FirstCaribbean International Bank Limited (CIBC FirstCaribbean), comprising a goodwill impairment charge of $420 million ($420 million after-tax) and loan losses of $123 million ($123 million after-tax), reflecting revised expectations on the extent and timing of the anticipated economic recovery in the Caribbean region (Corporate and Other);
  • $22 million ($16 million after-tax) expenses relating to the development of our enhanced travel rewards program and in respect of the Aeroplan transactions with Aimia Canada Inc. and TD (Retail and Business Banking);
  • $22 million ($12 million after-tax) loan losses in our exited U.S. leveraged finance portfolio (Wholesale Banking);
  • $9 million ($7 million after-tax) amortization of intangible assets(2) ($1 million after-tax in Retail and Business Banking, $4 million after-tax in Wealth Management, and $2 million after-tax in Corporate and Other); and
  • $4 million ($3 million after-tax) loss from the structured credit run-off business (Wholesale Banking).

The above items of note decreased revenue by $8 million, increased provision for credit losses by $145 million, non-interest expenses by $447 million, and decreased income tax expenses by $19 million. In aggregate, these items of note decreased net income by $581 million.

Net interest income(3)
Net interest income was down $24 million or 1% from the same quarter last year, primarily due to lower card-related net interest income as a result of the Aeroplan transactions with Aimia Canada Inc. (Aimia) and TD in the first quarter of 2014, lower treasury-related net interest income and lower revenue from our exited FirstLine mortgage broker business. These factors were partially offset by volume growth across most retail products and higher revenue from corporate banking.

Net interest income was down $107 million or 6% from the prior quarter, primarily due to fewer days in the quarter, lower card-related net interest income as a result of the Aeroplan transactions and lower treasury-related net interest income.

Net interest income for the six months ended April 30, 2014 was up $26 million or 1% from the same period in 2013, primarily due to volume growth across most retail products, and higher revenue from corporate banking and U.S. real estate finance. These factors were partially offset by lower card-related net interest income as a result of the Aeroplan transactions, lower treasury-related net interest income and lower revenue from our exited FirstLine mortgage broker business.

Non-interest income(3)
Non-interest income was up $67 million or 5% from the same quarter last year, primarily due to higher mutual fund and investment management and custodial fees, partially offset by lower card fees as a result of the Aeroplan transactions noted above.

Non-interest income was down $360 million or 21% from the prior quarter. The prior quarter included the gains relating to the Aeroplan transactions and the sale of an equity investment in our exited European leveraged finance portfolio, both shown as items of note.

Non-interest income for the six months ended April 30, 2014 was up $486 million or 19% from the same period in 2013, primarily due to the gains relating to the Aeroplan transactions, the sale of an equity investment, higher mutual fund and investment management and custodial fees, partially offset by lower card fees as a result of the Aeroplan transactions.

(1)  For additional information, see the "Non-GAAP measures" section.
(2)  Beginning in the fourth quarter of 2013, also includes amortization of intangible assets for equity-accounted associates.
(3)  Trading activities and related risk management strategies can periodically shift trading income between net interest income and non-interest income. Therefore, we view total trading income as the most appropriate measure of trading performance.

Provision for credit losses
Provision for credit losses was up $65 million or 25% from the same quarter last year. In Retail and Business Banking, the provision was down mainly due to lower write-offs and bankruptcies in the card portfolio, including the impact of the sold Aeroplan portfolio, and lower losses in the business lending portfolio. In Wholesale Banking, the provision was comparable with the same quarter last year. In Corporate and Other, the provision was up due to the loan losses relating to CIBC FirstCaribbean, shown as an item of note.

Provision for credit losses was up $112 million or 51% from the prior quarter. In Retail and Business Banking, the provision was down primarily due to a charge resulting from operational changes in the processing of write-offs in the prior quarter, shown as an item of note, and lower losses due to the impact of the sold Aeroplan portfolio. In Wholesale Banking, the provision was up mainly due to higher losses in our exited U.S. leveraged finance portfolio, shown as an item of note. In Corporate and Other, the provision was up primarily due to the loan losses relating to CIBC FirstCaribbean noted above. The prior quarter had a reduction in the collective allowance reported in this segment, including lower estimated credit losses relating to the Alberta floods, shown as an item of note.

Provision for credit losses for the six months ended April 30, 2014 was up $18 million or 3% from the same period in 2013. In Retail and Business Banking, the provision was down mainly due to lower write-offs and bankruptcies in the card portfolio, including the impact of the sold Aeroplan portfolio, and lower losses in the business lending portfolio, partially offset by the charge relating to the write-offs noted above. In Wholesale Banking, the provision was down due to lower losses in the U.S. real estate finance portfolio. In Corporate and Other, the provision was up due to the loan losses relating to CIBC FirstCaribbean, partially offset by the reduction in the collective allowance noted above.

Non-interest expenses
Non-interest expenses were up $587 million or 32% from the same quarter last year, primarily due to the goodwill impairment charge relating to CIBC FirstCaribbean, shown as an item of note, higher employee-related compensation, computer, software and office equipment expenses, and costs relating to the development of our enhanced travel rewards program and to the Aeroplan transactions, shown as an item of note.

Non-interest expenses were up $433 million or 22% from the prior quarter, primarily due to the goodwill impairment charge relating to CIBC FirstCaribbean.

Non-interest expenses for the six months ended April 30, 2014 were up $578 million or 15% from the same period in 2013, primarily due to the goodwill impairment charge relating to CIBC FirstCaribbean, higher employee-related compensation, computer, software and office equipment expenses and costs relating to development of our enhanced travel rewards program and to the Aeroplan transactions. The same period last year had higher expenses in the structured credit run-off business, which included the Lehman-related settlement charge shown as an item of note.

Income taxes
Income tax expense was down $53 million or 31% from the same quarter last year, and down $141 million or 54% from the prior quarter, primarily due to lower income. No tax recovery was booked in the current quarter in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

Income tax expense for the six months ended April 30, 2014 was up $80 million or 27% from the same period in 2013. Income tax expense was up notwithstanding lower income, primarily due to no tax recovery being booked in the current year period in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

In prior years, the Canada Revenue Agency issued reassessments disallowing the deduction of approximately $3 billion of the 2005 Enron settlement payments and related legal expenses. The matter is currently in litigation. The Tax Court of Canada trial on the deductibility of the Enron payments is scheduled to commence in October 2015.

Should we successfully defend our tax filing position in its entirety, we would recognize an additional accounting tax benefit of $214 million and taxable refund interest of approximately $202 million. Should we fail to defend our position in its entirety, we would incur an additional tax expense of approximately $866 million and non-deductible interest of approximately $124 million.

Foreign exchange
The estimated impact of U.S. dollar translation on key lines of our interim consolidated statement of income, as a result of changes in average exchange rates, is as follows: 

                For the three     For the six  
                months ended     months ended  
              Apr. 30, 2014   Apr. 30, 2014     Apr. 30, 2014  
                vs.     vs.       vs.  
$ millions           Apr. 30, 2013   Jan. 31, 2014     Apr. 30, 2013  
Estimated (decrease) increase in:                              
  Total revenue           $ 40   $ 11     $ 78  
  Provision for credit losses             13     3       16  
  Non-interest expense             49     14       64  
  Income taxes             -     -       2  
  Net income             (22)     (6)       (4)  
Average US$ appreciation relative to C$             8.3 %   2.1 %     8.4 %

Impact of items of note in prior periods
Net income for the prior quarters was affected by the following items of note:

Q1, 2014

  • $239 million ($183 million after-tax) gain in respect of the Aeroplan transactions with Aimia and TD, net of costs relating to the development of our enhanced travel rewards program ($123 million after-tax in Retail and Business Banking, and $60 million after-tax in Corporate and Other);
  • $78 million ($57 million after-tax) gain, net of associated expenses, on the sale of an equity investment in our exited European leveraged finance portfolio (Wholesale Banking);
  • $26 million ($19 million after-tax) reduction in the portion of the collective allowance recognized in Corporate and Other(1), including lower estimated credit losses relating to the Alberta floods (Corporate and Other);
  • $26 million ($19 million after-tax) charge resulting from operational changes in the processing of write-offs in Retail and Business Banking;
  • $11 million ($8 million after-tax) loss from the structured credit run-off business (Wholesale Banking); and
  • $8 million ($6 million after-tax) amortization of intangible assets ($1 million after-tax in Retail and Business Banking, $3 million after-tax in Wealth Management, and $2 million after-tax in Corporate and Other).

The above items of note increased revenue by $353 million, non-interest expenses by $55 million, and income tax expenses by $72 million. In aggregate, these items of note increased net income by $226 million.

Q2, 2013

  • $27 million ($20 million after-tax) income from the structured credit run-off business (Wholesale Banking);
  • $21 million ($15 million after-tax) loan losses in our exited European leveraged finance portfolio (Wholesale Banking); and
  • $6 million ($5 million after-tax) amortization of intangible assets ($1 million after-tax in Retail and Business Banking, $1 million after-tax in Wealth Management, and $3 million after-tax in Corporate and Other).

The above items of note increased revenue by $29 million, provision for credit losses by $21 million and non-interest expenses by $8 million. In aggregate, the impact of these items of note on net income was nil.

(1) Relates to collective allowance, except for (i) residential mortgages greater than 90 days delinquent; (ii) personal loans and scored small business loans greater than 30 days delinquent, and (iii) net write-offs for the card portfolio, which are all reported in the respective SBUs.

Q1, 2013

  • $148 million ($109 million after-tax) loss from the structured credit run-off business, including the charge in respect of a settlement of the U.S. Bankruptcy Court adversary proceeding brought by the Estate of Lehman Brothers Holdings, Inc. (Wholesale Banking);
  • $16 million ($16 million after-tax) gain, net of associated expenses, on the sale of our Hong Kong and Singapore-based private wealth management business (Corporate and Other); and
  • $5 million ($4 million after-tax) amortization of intangible assets ($2 million after-tax in Retail and Business Banking and $2 million after-tax in Corporate and Other).

The above items of note increased revenue by $28 million, non-interest expenses by $165 million, and decreased income tax expenses by $40 million. In aggregate, these items of note decreased net income by $97 million.

Significant events

Goodwill impairment
During the quarter, we recognized a goodwill impairment charge of $420 million relating to CIBC FirstCaribbean. This impairment reflects revised expectations on the extent and timing of the anticipated economic recovery in the Caribbean region. For additional information, see Accounting and control matters section and Note 6 to our interim consolidated financial statements.

Aeroplan Agreements and enhancements to CIBC travel rewards program
On December 27, 2013, CIBC completed the transactions contemplated by the tri-party agreements with Aimia and TD that were announced on September 16, 2013.

CIBC sold to TD approximately 50% of its existing Aerogold VISA credit card portfolio, consisting primarily of credit card only customers. Consistent with its strategy to invest in and deepen client relationships, CIBC retained the Aerogold VISA credit card accounts held by clients with broader banking relationships at CIBC.

The portfolio divested by CIBC consisted of $3.3 billion of credit card receivables. Upon closing, CIBC received a cash payment from TD equal to the credit card receivables outstanding being acquired by TD.

CIBC also received upon closing, in aggregate, $200 million in upfront payments from TD and Aimia.

In addition to these amounts, CIBC released $81 million of allowance for credit losses related to the sold portfolio, and incurred $3 million in direct costs related to the transaction in the three months ended January 31, 2014. The net gain on sale of the sold portfolio recognized in the three months ended January 31, 2014, which included the upfront payments, release of allowance for credit losses and costs related to the transaction, was $278 million ($211 million after-tax).

Under the terms of the agreements:

  • CIBC continues to have rights to market the Aeroplan program and originate new Aerogold cardholders through its CIBC branded channels.
  • The parties have agreed to certain provisions to compensate for the risk of cardholder migration from one party to another. There is potential for payments of up to $400 million by TD/Aimia or CIBC for net cardholder migration over a period of 5 years.
  • CIBC expects to receive annual commercial subsidy payments from TD of approximately $38 million per year in each of the three years after closing.
  • The CIBC and Aimia agreement includes an option for either party to terminate the agreement after the third year and provides for penalty payments due from CIBC to Aimia if holders of Aeroplan credit cards from CIBC's retained portfolio switch to other CIBC credit cards above certain thresholds.
  • CIBC is working with TD under an interim servicing agreement to effect a smooth transition of the cardholders moving to TD.

In conjunction with the completion of the Aeroplan transaction, CIBC has fully released Aimia and TD from any potential claims in connection with TD becoming Aeroplan's primary financial credit card partner.

Separate from the tri-party agreements, CIBC continues with its plan to provide enhancements to our proprietary travel rewards program, delivering on our commitment to give our clients access to a market leading travel rewards program. The enhanced program is built on extensive research and feedback from our clients and from Canadians about what they want from their travel rewards card.

CIBC incurred incremental costs of $22 million ($16 million after-tax) relating to the development of our enhanced travel rewards programs and in respect of supporting the tri-party agreements in the three months ended April 30, 2014 ($39 million ($28 million after-tax) in the three months ended January 31, 2014).

Atlantic Trust Private Wealth Management
On December 31, 2013, CIBC completed the acquisition of Atlantic Trust Private Wealth Management (Atlantic Trust) from its parent company, Invesco Ltd., for $224 million (US$210 million) plus working capital and other adjustments. Atlantic Trust provides integrated wealth management solutions for high-net-worth individuals, families, foundations and endowments in the United States. The results of the acquired business have been consolidated from the date of close and are included in the Wealth Management SBU. For additional information, see Note 3 to our interim consolidated financial statements.

Sale of equity investment
On November 29, 2013, CIBC sold an equity investment that was previously acquired through a loan restructuring in CIBC's exited European leveraged finance business. The transaction resulted in an after-tax gain, net of associated expenses, of $57 million.

Review of quarterly financial information

$ millions, except per share amounts,                                                                  
for the three months ended                 2014                               2013               2012
              Apr. 30       Jan. 31       Oct. 31       Jul. 31       Apr. 30       Jan. 31       Oct. 31       Jul. 31
Revenue                                                                  
  Retail and Business Banking       $ 1,939     $ 2,255     $ 2,087     $ 2,067     $ 1,985     $ 2,010     $ 2,012     $ 2,014
  Wealth Management         548       502       470       458       443       432       420       401
  Wholesale Banking (1)         606       680       520       589       574       557       567       519
  Corporate and Other (1)         74       197       103       135       122       166       140       201
Total revenue       $ 3,167     $ 3,634     $ 3,180     $ 3,249     $ 3,124     $ 3,165     $ 3,139     $ 3,135
Net interest income       $ 1,798     $ 1,905     $ 1,893     $ 1,883     $ 1,822     $ 1,855     $ 1,848     $ 1,883
Non-interest income         1,369       1,729       1,287       1,366       1,302       1,310       1,291       1,252
Total revenue         3,167       3,634       3,180       3,249       3,124       3,165       3,139       3,135
Provision for credit losses         330       218       271       320       265       265       328       317
Non-interest expenses         2,412       1,979       1,930       1,878       1,825       1,988       1,823       1,830
Income before income taxes         425       1,437       979       1,051       1,034       912       988       988
Income taxes         119       260       154       173       172       127       145       156
Net income       $ 306     $ 1,177     $ 825     $ 878     $ 862     $ 785     $ 843     $ 832
Net income (loss) attributable to:                                                                  
  Non-controlling interests       $ (11)     $ 3     $ (7)     $ 1     $ 2     $ 2     $ 3     $ 2
  Equity shareholders         317       1,174       832       877       860       783       840       830
EPS - basic       $ 0.73     $ 2.88     $ 2.02     $ 2.13     $ 2.09     $ 1.88     $ 2.00     $ 1.98
    - diluted         0.73       2.88       2.02       2.13       2.09       1.88       2.00       1.98
(1) Wholesale Banking revenue and income taxes are reported on a taxable equivalent basis (TEB) with an equivalent offset in the revenue
and income taxes of Corporate and Other.

Our quarterly results are modestly affected by seasonal factors. The second quarter has fewer days as compared with the other quarters, generally leading to lower earnings. The summer months (July - third quarter and August - fourth quarter) typically experience lower levels of capital markets activity, which affects our brokerage, investment management, and wholesale banking activities.

Revenue
Retail and Business Banking revenue has benefitted from volume growth across most retail products, largely offset by the impact of the sold Aeroplan portfolio from the first quarter of 2014, the continued low interest rate environment, and attrition in our exited FirstLine mortgage broker business. The first quarter of 2014 also included the gain relating to the Aeroplan transactions with Aimia and TD.

Wealth Management revenue has benefitted from the impact of the acquisition of Atlantic Trust from the first quarter of 2014, higher average assets under management (AUM), higher contribution from our equity-accounted investment in American Century Investments (ACI) and strong net sales of long-term mutual funds.

Wholesale Banking revenue is influenced, to a large extent, by capital markets conditions and growth in the equity derivatives business which has resulted in higher tax-exempt income. Revenue has also been impacted by the volatility in the structured credit run-off business. The first quarter of 2014 included a gain on the sale of an equity investment in our exited European leveraged finance portfolio, while the fourth quarter of 2013 included impairment of an equity position associated with our exited U.S. leveraged finance portfolio. The fourth quarter of 2012 included a gain on sale of interests in entities in relation to the acquisition of TMX Group Inc. and the loss relating to the change in valuation of collateralized derivatives to an overnight index swap (OIS) basis.

Corporate and Other includes the offset related to tax-exempt income noted above. The first quarter of 2014 included the gain relating to the Aeroplan transactions noted above and the first quarter of 2013 included the gain on sale of the private wealth management business (Asia).

Provision for credit losses
Provision for credit losses is dependent upon the credit cycle in general and on the credit performance of the loan portfolios. In Retail and Business Banking, losses in the card portfolio declined throughout 2012, 2013 and the first half of 2014. The losses in the card portfolio also declined as a result of the sold Aeroplan portfolio in the first quarter of 2014. A charge resulting from operational changes in the processing of write-offs was included in the first quarter of 2014, and a charge resulting from a revision of estimated loss parameters on our unsecured lending portfolios was included in the third quarter of 2013. In Wholesale Banking, the current quarter and the fourth quarter of 2012 included losses in the exited U.S. leveraged finance portfolio. The second and third quarter of 2013 had higher losses in the exited European leveraged finance portfolio. 2012 included higher losses in the U.S. real estate finance portfolio. In Corporate and Other, the current quarter had loan losses relating to CIBC FirstCaribbean. The third quarter of 2013 had an increase in the collective allowance, which included estimated credit losses relating to the Alberta floods, while the first quarter of 2014 included a decrease in collective allowance, including partial reversal of the credit losses relating to the Alberta floods.

Non-interest expenses
Non-interest expenses have fluctuated over the period largely due to changes in employee-related compensation and benefits, including pension expense. The current quarter had a goodwill impairment charge and the fourth quarter of 2013 had a restructuring charge relating to CIBC FirstCaribbean. The first half of 2014 and the fourth quarter of 2013 had expenses relating to the development of our enhanced travel rewards program, and to the Aeroplan transactions with Aimia and TD. The first quarter of 2013 also had higher expenses in the structured credit run-off business.

Income taxes
Income taxes vary with changes in income subject to tax, and the jurisdictions in which the income is earned. Taxes can also be affected by the impact of significant items. Tax-exempt income has generally been trending higher for the periods presented in the table above. No tax recovery was booked in the current quarter in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

Outlook for calendar year 2014
Global growth is expected to improve in the latter half of 2014, helped by a diminished burden from fiscal tightening in both the U.S. and Europe, and a continuation of stimulative monetary policy. U.S. real gross domestic product (GDP) is expected to accelerate to 2.6% as we move past the drag from tax hikes that affected 2013 and adverse first quarter weather. A pick-up in capital spending, and the lift to household incomes and credit quality from ongoing job creation should also help U.S. real GDP. Europe has emerged from recession, while emerging markets, after a slow start to the year, will benefit from improved global trade volumes. Canada's growth rate should improve to the 2.0% to 2.5% range, as firmer global conditions support exports, offsetting slower growth in housing construction and continued restraint in government program spending. Consumer demand will be sustained at moderate growth rates by job creation. Both the U.S. Federal Reserve and the Bank of Canada are likely to wait until 2015 before raising short term interest rates, although longer term rates could increase later in the year in anticipation of that future policy turn.

Retail banking is likely to see little change from the recent modest growth rates trend in demand for household and mortgage credit given existing levels of debt and the past few years' policy changes in mortgages. Demand for business credit should continue to grow at a healthy pace. A further drop in the unemployment rate should support household credit quality, but there is little room for business and household insolvency rates to drop from what are already very low levels. Wealth management should see an improvement in demand for equities and other higher risk assets as global growth improves. Wholesale banking should benefit from rising capital spending and greater M&A activity that increases the demand for corporate lending and debt financing, and provincial governments will still have elevated borrowing needs, including those related to infrastructure projects. A sturdier global climate could reduce uncertainties that held back equity issuance in the prior year.

Non-GAAP measures

We use a number of financial measures to assess the performance of our business lines. Some measures are calculated in accordance with GAAP (IFRS), while other measures do not have a standardized meaning under GAAP, and accordingly, these measures may not be comparable to similar measures used by other companies. Investors may find these non-GAAP measures useful in analyzing financial performance. For a more detailed discussion on our non-GAAP measures, see page 12 of the 2013 Annual Report. The following table provides a reconciliation of non-GAAP to GAAP measures related to CIBC on a consolidated basis.

                        As at or for the three       As at or for the six  
                        months ended       months ended  
                  2014     2014     2013       2014     2013  
$ millions                 Apr. 30     Jan. 31     Apr. 30       Apr. 30     Apr. 30  
Reported and adjusted diluted EPS                                              
Reported net income attributable to diluted common shareholders       A       $ 292   $ 1,149   $ 835     $ 1,441   $ 1,593  
After-tax impact of items of note (1)                 581     (226)     -       355     97  
After-tax impact of items of note on non-controlling interests                 (10)     -     -       (10)     -  
Adjusted net income attributable to diluted common shareholders (2)       B       $ 863   $ 923   $ 835     $ 1,786   $ 1,690  
Diluted weighted-average common shares outstanding (thousands)       C         398,519     399,217     400,812       398,861     402,315  
Reported diluted EPS ($)       A/C       $ 0.73   $ 2.88   $ 2.09     $ 3.61   $ 3.96  
Adjusted diluted EPS ($) (2)       B/C         2.17     2.31     2.09       4.48     4.20  
Reported and adjusted efficiency ratio                                              
Reported total revenue       D       $ 3,167   $ 3,634   $ 3,124     $ 6,801   $ 6,289  
Pre-tax impact of items of note (1)                 8     (353)     (29)       (345)     (57)  
TEB                 124     110     97       234     189  
Adjusted total revenue (2)       E       $ 3,299   $ 3,391   $ 3,192     $ 6,690   $ 6,421  
Reported non-interest expenses       F       $ 2,412   $ 1,979   $ 1,825     $ 4,391   $ 3,813  
Pre-tax impact of items of note (1)                 (447)     (55)     (8)       (502)     (173)  
Adjusted non-interest expenses (2)       G       $ 1,965   $ 1,924   $ 1,817     $ 3,889   $ 3,640  
Reported efficiency ratio       F/D         76.2 %   54.5 %   58.4 %     64.6 %   60.6 %
Adjusted efficiency ratio (2)       G/E         59.6 %   56.7 %   56.9 %     58.1 %   56.7 %
Reported and adjusted dividend payout ratio                                              
Reported net income attributable to common shareholders       H       $ 292   $ 1,149   $ 835     $ 1,441   $ 1,593  
After-tax impact of items of note attributable to common shareholders (1)                 571     (226)     -       345     97  
Adjusted net income attributable to common shareholders (2)       I       $ 863   $ 923   $ 835     $ 1,786   $ 1,690  
Dividends paid to common shareholders       J       $ 390   $ 382   $ 376     $ 772   $ 755  
Reported dividend payout ratio       J/H         133.5 %   33.3 %   44.9 %     53.6 %   47.3 %
Adjusted dividend payout ratio (2)       J/I         45.2 %   41.4 %   44.9 %     43.2 %   44.6 %
Reported and adjusted return on common shareholders' equity                                              
Average common shareholders' equity       K       $ 17,173   $ 16,581   $ 14,913     $ 16,872   $ 14,804  
Reported return on common shareholders' equity       H/K         7.0 %   27.5 %   23.0 %     17.2 %   21.7 %
Adjusted return on common shareholders' equity (2)       I/K         20.6 %   22.1 %   23.0 %     21.3 %   23.0 %
Reported and adjusted effective tax rate                                              
Reported income before income taxes       L       $ 425   $ 1,437   $ 1,034     $ 1,862   $ 1,946  
Pre-tax impact of items of note (1)                 600     (298)     -       302     137  
Adjusted income before income taxes (2)       M       $ 1,025   $ 1,139   $ 1,034     $ 2,164   $ 2,083  
Reported income taxes       N       $ 119   $ 260   $ 172     $ 379   $ 299  
Tax impact of items of note (1)                 19     (72)     -       (53)     40  
Adjusted income taxes (2)       O       $ 138   $ 188   $ 172     $ 326   $ 339  
Reported effective tax rate       N/L         28.1 %   18.1 %   16.6 %     20.4 %   15.3 %
Adjusted effective tax rate (2)       O/M         13.5 %   16.5 %   16.6 %     15.1 %   16.3 %
                                               

                Retail and                                  
                Business     Wealth       Wholesale       Corporate           CIBC
$ millions, for the three months ended         Banking   Management       Banking       and Other           Total
2014 Reported net income       $ 546   $ 117     $ 213     $ (570)     $     306
Apr. 30 After-tax impact of items of note (1)         17     4       15       545           581
    Adjusted net income (loss) (2)       $ 563   $ 121     $ 228     $ (25)     $     887
2014 Reported net income       $ 746   $ 114     $ 264     $ 53     $     1,177
Jan. 31 After-tax impact of items of note (1)         (103)     3       (49)       (77)           (226)
    Adjusted net income (loss) (2)       $ 643   $ 117     $ 215     $ (24)     $     951
2013 Reported net income       $ 572   $ 91     $ 192     $ 7     $     862
Apr. 30 After-tax impact of items of note (1)         1     1       (5)       3           -
    Adjusted net income (2)       $ 573   $ 92     $ 187     $ 10     $     862
$ millions, for the six months ended                                  
2014 Reported net income       $ 1,292   $ 231     $ 477     $ (517)     $     1,483
Apr. 30 After-tax impact of items of note (1)         (86)     7       (34)       468           355
    Adjusted net income (loss) (2)       $ 1,206   $ 238     $ 443     $ (49)     $     1,838
2013 Reported net income       $ 1,152   $ 180     $ 278     $ 37     $     1,647
Apr. 30 After-tax impact of items of note (1)         3     1       104       (11)           97
    Adjusted net income (2)       $ 1,155   $ 181     $ 382     $ 26     $     1,744
(1) Reflects impact of items of note under "Financial results" section.
(2) Non-GAAP measure.

Strategic business units overview

CIBC has three SBUs - Retail and Business Banking, Wealth Management and Wholesale Banking. These SBUs are supported by six functional groups - Technology and Operations, Corporate Development, Finance, Treasury, Administration, and Risk Management, which form part of Corporate and Other. The expenses of these functional groups are generally allocated to the business lines within the SBUs. Corporate and Other also includes our International banking operations comprising mainly CIBC FirstCaribbean, strategic investments in the CIBC Mellon joint ventures and The Bank of N.T. Butterfield & Son Limited, and other income statement and balance sheet items not directly attributable to the business lines.

Business unit allocations
Treasury activities impact the reported financial results of the SBUs. Each line of business within our SBUs is charged or credited with a market-based cost of funds on assets and liabilities, respectively, which impacts the revenue performance of the SBUs. Once the interest and liquidity risk inherent in our client-driven assets and liabilities is transfer priced into Treasury, it is managed within CIBC's risk framework and limits. The residual financial results associated with Treasury activities are reported in Corporate and Other. Capital is attributed to the SBUs in a manner that is intended to consistently measure and align economic costs with the underlying benefits and risks associated with SBU activities. Earnings on unattributed capital remain in Corporate and Other. We review our transfer pricing methodologies on an ongoing basis to ensure they reflect changing market environments and industry practices.

To measure and report the results of operations of the lines of business within our Retail and Business Banking and Wealth Management SBUs, we use a Manufacturer/Customer Segment/Distributor Management Model. The model uses certain estimates and allocation methodologies in the preparation of segmented financial information. Under this model, internal payments for sales and trailer commissions and distribution service fees are made among the lines of business and SBUs. Periodically, the sales and trailer commission rates paid to customer segments for certain products are revised and applied prospectively.

Non-interest expenses are attributed to the SBUs to which they relate based on appropriate criteria. Revenue, expenses, and other balance sheet resources related to certain activities are fully allocated to the lines of business within the SBUs.

The individual allowances and related provisions are reported in the respective SBUs. The collective allowances and related provisions are reported in Corporate and Other except for: (i) residential mortgages greater than 90 days delinquent; (ii) personal loans and scored small business loans greater than 30 days delinquent; and (iii) net write-offs for the card portfolio, which are all reported in the respective SBUs. All allowances and related provisions for CIBC FirstCaribbean are reported in Corporate and Other.

Retail and Business Banking

Retail and Business Banking provides clients across Canada with financial advice, banking, investment, and authorized insurance products and services through a strong team of advisors and more than 1,100 branches, as well as our ABMs, mobile sales force, telephone banking, online and mobile banking.

Results(1)

                        For the three            For the six  
                        months ended         months ended  
                2014     2014     2013       2014     2013  
$ millions             Apr. 30     Jan. 31     Apr. 30       Apr. 30     Apr. 30  
Revenue                                          
  Personal banking           $ 1,539   $ 1,576   $ 1,463     $ 3,115   $ 2,945  
  Business banking             368     380     374       748     757  
  Other (2)             32     299     148       331     293  
Total revenue             1,939     2,255     1,985       4,194     3,995  
Provision for credit losses             173     210     233       383     474  
Non-interest expenses             1,040     1,055     988       2,095     1,985  
Income before taxes             726     990     764       1,716     1,536  
Income taxes             180     244     192       424     384  
Net income           $ 546   $ 746   $ 572     $ 1,292   $ 1,152  
Net income attributable to:                                          
  Equity shareholders (a)           $ 546   $ 746   $ 572     $ 1,292   $ 1,152  
Efficiency ratio             53.6 %   46.8 %   49.8 %     49.9 %   49.7 %
Return on equity (3)             58.1 %   77.9 %   61.0 %     68.1 %   62.4 %
Charge for economic capital (3) (b)           $ (117)   $ (119)   $ (118)     $ (236)   $ (233)  
Economic profit (3) (a+b)           $ 429   $ 627   $ 454     $ 1,056   $ 919  
Full-time equivalent employees             22,306     22,243     21,987       22,306     21,987  
(1) For additional segmented information, see the notes to the interim consolidated financial statements.
(2) Includes run-off portfolios relating to FirstLine mortgage broker business, student loans and cards.
(3) For additional information, see the "Non-GAAP measures" section.

Financial overview
Net income for the quarter was $546 million, down $26 million from the same quarter last year, primarily due to higher non-interest expenses and lower revenue, partially offset by lower provision for credit losses.

Net income was down $200 million from the prior quarter, mainly due to lower revenue partially offset by lower provision for credit losses.

Net income for the six months ended April 30, 2014 was $1,292 million, up $140 million from the same period in 2013, primarily due to higher revenue and lower provision for credit losses, partially offset by higher non-interest expenses.

Revenue
Revenue was down $46 million or 2% from the same quarter last year.

Personal banking revenue was up $76 million, mainly due to volume growth across most products.

Business banking revenue was down $6 million, mainly due to narrower spreads, partially offset by volume growth.

Other revenue was down $116 million, mainly due to lower cards revenue as a result of the Aeroplan transactions with Aimia and TD, and lower revenue from our exited FirstLine mortgage broker business.

Revenue was down $316 million or 14% from the prior quarter.

Personal banking revenue was down $37 million, primarily due to fewer days in the quarter.

Business banking revenue was down $12 million, primarily due to fewer days in the quarter.

Other revenue was down $267 million, due to the gain relating to the Aeroplan transactions in the prior quarter, shown as an item of note, and lower cards revenue as a result of these transactions.

Revenue for the six months ended April 30, 2014 was up $199 million or 5% from the same period in 2013.

Personal banking revenue was up $170 million, due to volume growth across most products, higher fees and wider spreads.

Business banking revenue was down $9 million, mainly due to narrower spreads, partially offset by volume growth.

Other revenue was up $38 million, mainly due to the gain relating to the Aeroplan transactions noted above, partially offset by lower cards revenue as a result of these transactions, and lower revenue from our exited FirstLine mortgage broker business.

Provision for credit losses
Provision for credit losses was down $60 million from the same quarter last year, mainly due to lower write-offs and bankruptcies in the card portfolio, including the impact of the sold Aeroplan portfolio, and lower losses in the business lending portfolio.

Provision for credit losses was down $37 million from the prior quarter, primarily due to a charge resulting from operational changes in the processing of write-offs in the prior quarter, shown as an item of note, and lower losses in the card portfolio as a result of the sold Aeroplan portfolio.

Provision for credit losses for the six months ended April 30, 2014 was down $91 million from the same period in 2013, mainly due to lower write-offs and bankruptcies in the card portfolio, including the impact of the sold Aeroplan portfolio, and lower losses in the business lending portfolio, partially offset by the charge relating to the write-offs noted above.

Non-interest expenses
Non-interest expenses were up $52 million or 5% from the same quarter last year, primarily due to costs relating to the development of our enhanced travel rewards program, shown as an item of note, and higher spending on strategic initiatives.

Non-interest expenses were down $15 million from the prior quarter. The prior quarter had costs relating to the Aeroplan transactions, partially offset by higher costs relating to the development of our enhanced travel rewards program in the current quarter.

Non-interest expenses for the six months ended April 30, 2014 were up $110 million or 6% from the same period in 2013, primarily due to costs relating to development of our enhanced travel rewards program and to the Aeroplan transactions noted above, and higher spending on strategic initiatives.

Income taxes
Income taxes were down $12 million and $64 million from the same quarter last year and the prior quarter, respectively, primarily due to lower income.

Income taxes for the six months ended April 30, 2014 were up $40 million from the same period in 2013, primarily due to higher income.

Wealth Management

Wealth Management provides relationship-based advisory services and an extensive suite of leading investment solutions to meet the needs of institutional, retail and high net worth clients. Our asset management, retail brokerage and private wealth management businesses combine to create an integrated offer, delivered through more than 1,500 advisors across Canada and the U.S.

Results(1)

                        For the three         For the six  
                        months ended         months ended  
                2014     2014     2013       2014     2013  
$ millions             Apr. 30     Jan. 31     Apr. 30       Apr. 30     Apr. 30  
Revenue                                          
  Retail brokerage           $ 292   $ 284   $ 262     $ 576   $ 521  
  Asset management             181     172     153       353     297  
  Private wealth management             75     46     28       121     57  
Total revenue             548     502     443       1,050     875  
Provision for (reversal of) credit losses             1     (1)     -       -     -  
Non-interest expenses             395     351     324       746     640  
Income before taxes             152     152     119       304     235  
Income taxes             35     38     28       73     55  
Net income           $ 117   $ 114   $ 91     $ 231   $ 180  
Net income attributable to:                                          
  Non-controlling interests           $ 1   $ 1   $ -     $ 2   $ -  
  Equity shareholders (a)             116     113     91       229     180  
Efficiency ratio             72.2 %   69.9 %   72.9 %     71.1 %   73.1 %
Return on equity (2)             22.4 %   22.5 %   19.8 %     22.4 %   19.4 %
Charge for economic capital (2) (b)           $ (63)   $ (62)   $ (56)     $ (125)   $ (114)  
Economic profit (2) (a+b)           $ 53   $ 51   $ 35     $ 104   $ 66  
Full-time equivalent employees             4,108     4,056     3,792       4,108     3,792  
(1) For additional segmented information, see the notes to the interim consolidated financial statements.
(2) For additional information, see the "Non-GAAP measures" section.

Financial overview
Net income for the quarter was $117 million, up $26 million from the same quarter last year, and up $3 million from the prior quarter, primarily due to higher revenue, partially offset by higher non-interest expenses.

Net income for the six months ended April 30, 2014 was $231 million, up $51 million from the same period in 2013, primarily due to higher revenue, partially offset by higher non-interest expenses.

Revenue
Revenue was up $105 million or 24% from the same quarter last year, and up $46 million or 9% from the prior quarter.

Retail brokerage revenue was up $30 million from the same quarter last year, mainly due to higher fee-based and commission revenue, and up $8 million from the prior quarter, primarily due to higher fee-based revenue.

Asset management revenue was up $28 million from the same quarter last year, and up $9 million from the prior quarter, primarily due to higher client AUM driven by market appreciation and net sales of long-term mutual funds, and higher contribution from our equity-accounted investment in ACI.

Private wealth management revenue was up $47 million from the same quarter last year, and up $29 million from the prior quarter, mainly due to the acquisition of Atlantic Trust on December 31, 2013, and higher AUM driven by client balance growth.

Revenue for the six months ended April 30, 2014 was up $175 million or 20% from the same period in 2013.

Retail brokerage revenue was up $55 million, mainly due to higher fee-based and commission revenue.

Asset management revenue was up $56 million, primarily due to higher client AUM driven by market appreciation and net sales of long-term mutual funds, and higher contribution from our equity-accounted investment in ACI.

Private wealth management revenue was up $64 million, mainly due to the acquisition noted above and higher AUM driven by client balance growth.

Non-interest expenses
Non-interest expenses were up $71 million or 22% from the same quarter last year, and up $44 million or 13% from the prior quarter, primarily due to the impact of the acquisition noted above and higher employee-related compensation.

Non-interest expenses for the six months ended April 30, 2014 were up $106 million or 17% from the same period in 2013, primarily due to the impact of the acquisition noted above and higher employee-related compensation.

Income taxes
Income taxes were up $7 million from the same quarter last year mainly due to higher income.

Income taxes were comparable with the prior quarter.

Income taxes for the six months ended April 30, 2014 were up $18 million from the same period in 2013 mainly due to higher income.

Wholesale Banking

Wholesale Banking provides a wide range of credit, capital markets, investment banking and research products and services to government, institutional, corporate and retail clients in Canada and in key markets around the world.

Results(1)

                      For the three       For the six  
                      months ended       months ended  
                2014     2014     2013       2014     2013  
$ millions             Apr. 30     Jan. 31     Apr. 30       Apr. 30     Apr. 30  
Revenue                                          
  Capital markets           $ 331   $ 330   $ 311     $ 661   $ 638  
  Corporate and investment banking             275     250     222       525     433  
  Other             -     100     41       100     60  
Total revenue (2)             606     680     574       1,286     1,131  
Provision for credit losses             21     2     21       23     31  
Non-interest expenses             318     329     298       647     743  
Income before taxes             267     349     255       616     357  
Income taxes (2)             54     85     63       139     79  
Net income           $ 213   $ 264   $ 192     $ 477   $ 278  
Net income attributable to:                                          
  Equity shareholders (a)           $ 213   $ 264   $ 192     $ 477   $ 278  
Efficiency ratio (2)             52.6 %   48.3 %   52.0 %     50.3 %   65.7 %
Return on equity (3)             36.0 %   44.9 %   38.6 %     40.5 %   26.9 %
Charge for economic capital (3) (b)           $ (73)   $ (73)   $ (61)     $ (146)   $ (128)  
Economic profit (3) (a+b)           $ 140   $ 191   $ 131     $ 331   $ 150  
Full-time equivalent employees             1,248     1,244     1,245       1,248     1,245  
(1) For additional segmented information, see the notes to the interim consolidated financial statements.
(2) Revenue and income taxes are reported on a TEB basis. Accordingly, revenue and income taxes include
a TEB adjustment of $124 million for the quarter ended April 30, 2014 (January 31, 2014: $110 million;
April 30, 2013: $97 million) and $234 million for the six months ended April 30, 2014 (April 30, 2013:
$189 million). The equivalent amounts are offset in the revenue and income taxes of Corporate and Other.
(3) For additional information, see the "Non-GAAP measures" section.

Financial overview
Net income for the quarter was $213 million, up $21 million from the same quarter last year, mainly due to higher revenue, partially offset by higher non-interest expenses.

Net income was down $51 million from the prior quarter, mainly due to lower revenue and a higher provision for credit losses, partially offset by lower non-interest expenses.

Net income for the six months ended April 30, 2014 was $477 million, up $199 million from the same period in 2013, mainly due to higher revenue and lower non-interest expenses.

Revenue
Revenue was up $32 million or 6% from the same quarter last year.

Capital markets revenue was up $20 million, primarily due to higher revenue from equity derivatives and fixed income trading, partially offset by lower commodities trading revenue.

Corporate and investment banking revenue was up $53 million, mainly due to higher revenue from corporate banking and U.S. real estate finance and higher investment portfolio gains, partially offset by lower advisory revenue.

Other revenue was down $41 million, primarily due to losses in the structured credit run-off business compared with gains in the prior year quarter.

Revenue was down $74 million or 11% from the prior quarter.

Capital markets revenue was comparable with the prior quarter.

Corporate and investment banking revenue was up $25 million, primarily due to higher investment portfolio gains and higher revenue from corporate banking and U.S. real estate finance.

Other revenue was down $100 million from the prior quarter, primarily due to the gain on the sale of an equity investment in our exited European leveraged finance portfolio in the prior quarter, shown as an item of note.

Revenue for the six months ended April 30, 2014 was up $155 million or 14% from the same period in 2013.

Capital markets revenue was up $23 million, primarily due to higher equity derivatives and foreign exchange trading revenue, partially offset by a lower reversal of credit valuation adjustments (CVA) against credit exposures to derivative counterparties (other than financial guarantors).

Corporate and investment banking revenue was up $92 million, mainly due to higher revenue from corporate banking and U.S. real estate finance and higher investment portfolio gains, partially offset by lower advisory revenue.

Other revenue was up $40 million, primarily due to the gain on the sale of an equity investment noted above, partially offset by losses in the structured credit run-off business compared with gains in the prior year period.

Provision for credit losses
Provision for credit losses was comparable with the same quarter last year. Loan losses in our exited U.S. leveraged finance portfolio in the current quarter were offset by loan losses in our exited European leveraged finance portfolio in the same quarter last year, both shown as items of note.

Provision for credit losses was up $19 million from the prior quarter, mainly due to higher losses in our exited U.S. leveraged finance portfolio, shown as an item of note.

Provision for credit losses for the six months ended April 30, 2014 was down $8 million from the same period in 2013 due to lower losses in the U.S. real estate finance portfolio. Loan losses in our exited U.S. leveraged finance portfolio in the current year period were offset by loan losses in our exited European leveraged finance portfolio in the prior year period, as noted above.

Non-interest expenses
Non-interest expenses were up $20 million or 7% from the same quarter last year, mainly due to increased spending on strategic initiatives.

Non-interest expenses were down $11 million or 3% from the prior quarter, mainly due to lower performance-based compensation.

Non-interest expenses for the six months ended April 30, 2014 were down $96 million or 13% from the same period in 2013, as the prior period included expenses in the structured credit run-off business related to the charge in respect of a settlement of the U.S. Bankruptcy Court adversary proceeding brought by the Estate of Lehman Brothers Holdings, Inc., shown as an item of note.

Income taxes
Income taxes for the quarter were down $9 million from the same quarter last year, primarily due to the impact of changes in the proportion of income subject to varying rates of tax in different jurisdictions.

Income taxes for the quarter were down $31 million from the prior quarter, primarily due to lower income and the impact of changes in the proportion of income subject to varying rates of tax in different jurisdictions.

Income taxes for the six months ended April 30, 2014 were up $60 million from the same period in 2013, primarily due to higher income, partially offset by the impact of changes in the proportion of income subject to varying rates of tax in different jurisdictions.

Structured credit run-off business
The results of the structured credit run-off business are included in the Wholesale Banking SBU.


Results                     For the three     For the six
                        months ended     months ended
                2014       2014       2013     2014       2013
$ millions             Apr. 30       Jan. 31       Apr. 30     Apr. 30       Apr. 30
Net interest income (expense)           $ (10)     $ (13)     $ (9)   $ (23)     $ (23)
Trading income             24       5       35     29       53
Designated at fair value (FVO) losses             (17)       (2)       (3)     (19)       (6)
Other income             -       -       6     -       11
Total revenue             (3)       (10)       29     (13)       35
Non-interest expenses             1       1       2     2       156
Income (loss) before taxes             (4)       (11)       27     (15)       (121)
Income taxes             (1)       (3)       7     (4)       (32)
Net income (loss)           $ (3)     $ (8)     $ 20   $ (11)     $ (89)

Net loss for the quarter was $3 million (US$3 million), compared with net income of $20 million (US$20 million) for the same quarter last year and net loss of $8 million (US$7 million) for the prior quarter. The net loss for the six months ended April 30, 2014 was $11 million (US$10 million), down $78 million (US$77 million) from the same period in 2013.

Net loss for the quarter was mainly due to net interest expense, the result of transactions completed to reduce our structured credit positions, and a decrease in the value of receivables related to protection purchased from financial guarantors (on loan assets that are carried at amortized cost), resulting from an increase in the mark-to-market (MTM) of the underlying positions. These were partially offset by gains on unhedged positions and a reduction in CVA relating to financial guarantors.

During the quarter, terminations reduced the notional of the purchased credit derivatives with financial guarantors by US$243 million. The completion of these transactions resulted in an aggregate pre-tax loss of $9 million (US$9 million), or $7 million (US$6 million) after-tax.

Position summary
The following table summarizes our positions within our structured credit run-off business:

                              Written credit                        
                              derivatives, liquidity     Credit protection purchased from
US$ millions, as at April 30, 2014     Investments and loans (1)   and credit facilities     Financial guarantors     Other counterparties
                  Fair     Carrying                                    
          Fair value of     value of     value of           Fair                        
          trading, AFS     securities     securities           value of           Fair value           Fair value
            and FVO     classified     classified       written credit           net of           net of
      Notional     securities     as loans     as loans     Notional     derivatives     Notional     CVA     Notional     CVA
USRMM - CDO   $ -   $ -   $ -   $ -   $ 224   $ 157   $ -   $ -   $ 224   $ 157
CLO     2,061     1     1,999     2,011     1,910     29     3,517     47     99     2
Corporate debt     -     -     -     -     4,064     6     -     -     4,064     9
Other     642     436     32     32     438     35     25     3     12     2
Unmatched     -     -     -     -     -     -     -     -     456     1
    $ 2,703   $ 437   $ 2,031   $ 2,043   $ 6,636   $ 227   $ 3,542   $ 50   $ 4,855   $ 171
October 31, 2013   $ 3,269   $ 494   $ 2,497   $ 2,507   $ 7,543   $ 269   $ 4,718   $ 87   $ 5,145   $ 188
(1) Excluded from the table above are equity available-for-sale (AFS) securities that we obtained in consideration for commutation of our U.S. residential
mortgage market (USRMM) contracts with financial guarantors with a carrying value of US$18 million (October 31, 2013: US$10 million).

USRMM - collateralized debt obligation (CDO)
Our net USRMM position, consisting of a written credit derivative, amounted to US$67 million. This position was hedged through protection purchased from a large U.S.-based diversified multinational insurance and financial services company with which we have market-standard collateral arrangements.

Collateralized loan obligation (CLO)
CLO positions consist of senior tranches of CLOs backed by diversified pools of primarily U.S. (63%) and European-based (34%) senior secured leveraged loans. As at April 30, 2014, approximately 35% of the total notional amount of the CLO tranches was rated equivalent to AAA, 62% was rated between the equivalent of AA+ and AA-, and the remainder was the equivalent of A or lower. As at April 30, 2014, approximately 17% of the underlying collateral was rated equivalent to BB- or higher, 59% was rated between the equivalent of B+ and B-, 5% was rated equivalent to CCC+ or lower, with the remainder unrated. The CLO positions have a weighted-average life of 2.1 years and average subordination of 31%.

Corporate debt
Corporate debt exposure consists of a large matched super senior derivative, where CIBC has purchased and sold credit protection on the same reference portfolio. The reference portfolio consists of highly diversified, predominantly investment grade corporate credit. Claims on these contracts do not occur until cumulative credit default losses from the reference portfolio exceed 30% during the remaining 32-month term of the contract. On this reference portfolio, we have sold protection to an investment dealer.

Other
Our significant positions in the Investments and loans section within Other, as at April 30, 2014, include:

  • Variable rate Class A-1/A-2 notes classified as trading securities with a notional value of US$264 million and a fair value of US$238 million, tracking notes classified as AFS with a notional value of US$5 million and a fair value of US$2 million, and loans with a notional value of US$56 million and fair value and carrying value of nil. These notes were originally received in exchange for our non-bank sponsored asset-backed commercial paper (ABCP) in January 2009, upon the ratification of the Montreal Accord restructuring;
  • US$151 million notional value of CDOs consisting of trust preferred securities (TruPs) collateral, which are Tier I Innovative Capital Instruments issued by U.S. regional banks and insurers. These securities are classified as FVO securities and had a fair value of US$124 million;
  • US$68 million notional value of CDO trading securities with collateral consisting of high-yield corporate debt portfolios with a fair value of US$65 million; and
  • US$35 million notional value of an asset-backed security (ABS) classified as a loan, with fair value of US$33 million and carrying value of US$32 million.

Our significant positions in the Written credit derivatives, liquidity and credit facilities section within Other, as at April 30, 2014, include:

  • US$275 million notional value of written credit derivatives with a fair value of US$34 million, on inflation-linked notes, and CDO tranches with collateral consisting of non-U.S. residential mortgage-backed securities and TruPs; and
  • US$108 million of undrawn Margin Funding Facility related to the Montreal Accord restructuring.

Unmatched
The underlying in our unmatched position is a reference portfolio of corporate debt.

Credit protection purchased from financial guarantors and other counterparties
The following table presents the notional amounts and fair values of credit protection purchased from financial guarantors and other counterparties by counterparty credit quality, based on external credit ratings (Standard & Poor's (S&P) and/or Moody's Investors Service (Moody's)), and the underlying referenced assets. Excluded from the table below are certain performing loans and tranched securities positions in our continuing businesses, with a total notional amount of approximately US$3 million, which are partly secured by direct guarantees from financial guarantors or by bonds guaranteed by financial guarantors.

                          Credit protection purchased
                                                    from financial guarantors
          Notional amounts of referenced assets   and other counterparties
                  Corporate     CDO -                   Total     Fair value               Fair value
US$ millions, as at April 30, 2014           CLO     debt     USRMM       Other     Unmatched     notional   before CVA         CVA   net of CVA
Financial guarantors (1)                                                                  
  Investment grade       $   2,203   $ -   $ -   $   25   $ -   $ 2,228   $ 45   $     (8)   $ 37
  Unrated           1,314     -     -       -     -     1,314     19         (6)     13
              3,517     -     -       25     -     3,542     64         (14)     50
Other counterparties (1)                                                                  
  Investment grade           99     10     224       12     -     345     160         1     161
  Unrated           -     4,054     -       -     456     4,510     10         -     10
              99     4,064     224       12     456     4,855     170         1     171
        $   3,616   $ 4,064   $ 224   $   37   $ 456   $ 8,397   $ 234   $     (13)   $ 221
October 31, 2013       $   4,642   $ 4,271   $ 241   $   229   $ 480   $ 9,863   $ 312   $     (37)   $ 275
(1)  In cases where more than one credit rating agency provides ratings and those ratings differ, we use the lowest rating.

The unrated other counterparty is a Canadian conduit. The conduit is in compliance with collateral posting arrangements and has posted collateral exceeding current market exposure. The fair value of the collateral as at April 30, 2014 was US$273 million relative to US$10 million of net exposure.

Lehman Brothers bankruptcy proceedings
During the six months ended April 30, 2013, we recognized a US$150 million charge (US$110 million after-tax) in respect of the full settlement of the U.S. Bankruptcy Court adversary proceeding brought by the Estate of Lehman Brothers Holdings, Inc. challenging the reduction to zero of our unfunded commitment on a variable funding note. In 2008, we recognized a US$841 million gain on the variable funding note.

Corporate and Other

Corporate and Other includes the six functional groups - Technology and Operations, Corporate Development, Finance, Treasury, Administration, and Risk Management - that support CIBC's SBUs. The expenses of these functional groups are generally allocated to the business lines within the SBUs. Corporate and Other also includes our International banking operations comprising mainly CIBC FirstCaribbean, strategic investments in the CIBC Mellon joint ventures and The Bank of N.T. Butterfield & Son Limited, and other income statement and balance sheet items not directly attributable to the business lines.

Results(1)

                      For the three   For the six
                      months ended   months ended
              2014     2014     2013     2014     2013
$ millions             Apr. 30     Jan. 31     Apr. 30     Apr. 30     Apr. 30
Revenue                                      
  International banking           $ 146   $ 154   $ 140   $ 300   $ 303
  Other             (72)     43     (18)     (29)     (15)
Total revenue (2)             74     197     122     271     288
Provision for credit losses             135     7     11     142     25
Non-interest expenses             659     244     215     903     445
Loss before taxes             (720)     (54)     (104)     (774)     (182)
Income taxes (2)             (150)     (107)     (111)     (257)     (219)
Net income (loss)           $ (570)   $ 53   $ 7   $ (517)   $ 37
Net income (loss) attributable to:                                      
  Non-controlling interests           $ (12)   $ 2   $ 2   $ (10)   $ 4
  Equity shareholders             (558)     51     5     (507)     33
Full-time equivalent employees             16,245     16,030     16,033     16,245     16,033
(1)  For additional segmented information, see the notes to the interim consolidated financial statements.
(2)  TEB adjusted. See footnote 2 in "Wholesale Banking" section for additional details.

Financial overview
Net loss for the quarter was $570 million, compared with net income of $7 million from the same quarter last year and net income of $53 million in the prior quarter, primarily due to higher non-interest expenses and provision for credit losses, and lower revenue.

Net loss for the six months ended April 30, 2014 was $517 million, compared with net income of $37 million in the same period last year, primarily due to higher non-interest expenses and provision for credit losses.

Revenue
Revenue was down $48 million or 39% from the same quarter last year.

International banking revenue was up $6 million, due to higher revenue from favourable foreign exchange rates.

Other revenue was down $54 million, due to lower treasury revenue and a higher TEB adjustment.

Revenue was down $123 million or 62% from the prior quarter.

International banking revenue was down $8 million, due to lower revenue from CIBC FirstCaribbean.

Other revenue was down $115 million. The prior quarter included the gain relating to the Aeroplan transactions with Aimia and TD, shown as an item of note, and the current quarter had lower treasury revenue and a higher TEB adjustment.

Revenue for the six months ended April 30, 2014 was down $17 million or 6% from the same period last year.

International banking revenue was comparable with the same period last year as the gain on the sale of our private wealth management (Asia) business, shown as an item of note in the prior year period, was largely offset by higher revenue from favourable foreign exchange rates.

Other revenue was down $14 million, primarily due to lower treasury revenue and a higher TEB adjustment, partially offset by the gain relating to the Aeroplan transactions noted above.

Provision for credit losses
Provision for credit losses was up $124 million from the same quarter last year, due to the loan losses relating to CIBC FirstCaribbean, shown as an item of note.

Provision for credit losses was up $128 million from the prior quarter, primarily due to the loan losses relating to CIBC FirstCaribbean noted above. The prior quarter had a reduction in the collective allowance, including lower estimated credit losses relating to the Alberta floods, shown as an item of note.

Provision for credit losses for the six months ended April 30, 2014 was up $117 million from the same period in 2013, primarily due to the loan losses relating to CIBC FirstCaribbean, partially offset by the reduction in the collective allowance noted above.

Non-interest expenses
Non-interest expenses were up $444 million and $415 million compared with the same quarter last year and the prior quarter, respectively, primarily due to the goodwill impairment charge relating to CIBC FirstCaribbean, shown as an item of note.

Non-interest expenses for the six months ended April 30, 2014 were up $458 million from the same period in 2013, primarily due to the charge noted above.

Income taxes
Income tax benefit was up $39 million from the same quarter last year, and up $43 million from the prior quarter, primarily due to a higher TEB adjustment and lower income. No tax recovery was booked in the current quarter in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

Income tax benefit for the six months ended April 30, 2014 was up $38 million from the same period in 2013, primarily due to a higher TEB adjustment. No tax recovery was booked in the current year period in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

Financial condition

Review of condensed consolidated balance sheet

                2014         2013
$ millions, as at               Apr. 30         Oct. 31
Assets                          
Cash and deposits with banks           $   10,688     $   6,379
Securities               67,204         71,984
Securities borrowed or purchased under resale agreements               27,325         28,728
Loans and acceptances, net of allowance               258,680         256,380
Derivative instruments               19,346         19,947
Other assets               13,859         14,588
            $   397,102     $   398,006
Liabilities and equity                          
Deposits           $   314,023     $   315,164
Obligations related to securities lent or sold short or under repurchase agreements               21,910         20,313
Derivative instruments               18,746         19,724
Other liabilities               19,953         20,583
Subordinated indebtedness               4,226         4,228
Equity               18,244         17,994
            $   397,102     $   398,006

Assets
As at April 30, 2014, total assets were down by $904 million from October 31, 2013.

Cash and deposits with banks increased by $4.3 billion or 68%, mostly due to higher treasury deposit placements.

Securities decreased by $4.8 billion or 7%, primarily due to a decrease in AFS securities, partially offset by an increase in trading securities. AFS securities decreased primarily due to lower Canadian government securities and public corporate debt, partially offset by an increase in U.S. Treasury and agencies securities. Trading securities increased primarily due to an increase in corporate equities, partially offset by a decrease in Canadian government securities.

Securities borrowed or purchased under resale agreements decreased by $1.4 billion or 5%, primarily due to treasury investment management activities.

Net loans and acceptances increased by $2.3 billion or 1%. Business and government loans and acceptances were up $3.6 billion, largely due to an increase in our domestic lending portfolio. Residential mortgages were up $1.6 billion, primarily due to growth in CIBC-branded mortgages, partially offset by attrition in the exited FirstLine mortgage broker business. Personal loans were up $303 million, due to volume growth. These increases were partially offset by credit card loans, which were down $3.1 billion, primarily due to the Aeroplan transactions with Aimia and TD.

Derivative instruments decreased by $601 million or 3%, largely driven by the decrease in interest rate derivatives valuation, partially offset by an increase in foreign exchange derivatives valuation.

Other assets decreased by $729 million or 5%, primarily due to the goodwill impairment relating to CIBC FirstCaribbean and a decrease in collateral pledged for derivatives, partially offset by the assets acquired as a result of the acquisition of Atlantic Trust.

Liabilities
As at April 30, 2014, total liabilities were down by $1.2 billion from October 31, 2013.

Deposits decreased by $1.1 billion, primarily due to lower outstanding secured borrowings, partially offset by retail volume growth. Further details on the composition of deposits are provided in Note 8 to the interim consolidated financial statements.

Obligations related to securities lent or sold short or under repurchase agreements increased by $1.6 billion or 8%, primarily due to client-driven activities.

Derivative instruments decreased by $978 million or 5%, largely driven by a decrease in interest rate derivatives valuation, partially offset by an increase in foreign exchange derivatives valuation.

Other liabilities decreased by $630 million or 3%, mainly due to lower acceptances.

Equity
As at April 30, 2014, equity increased by $250 million or 1% from October 31, 2013, primarily due to a net increase in retained earnings and accumulated other comprehensive income (AOCI). These were partially offset by the redemption of our preferred shares and repurchase and cancellation of common shares under the normal course issuer bid, as explained in the "Significant capital management activity" section below.

Capital resources

We actively manage our capital to maintain a strong and efficient capital base, to maximize risk-adjusted returns to shareholders, and to meet regulatory requirements. For additional details on capital resources, see pages 29 to 36 of the 2013 Annual Report.

Regulatory capital requirements under Basel III
Our regulatory capital requirements are determined in accordance with guidelines issued by the Office of the Superintendent of Financial Institutions (OSFI) which are based on the risk-based capital standards developed by the Basel Committee on Banking Supervision (BCBS).

OSFI mandated all institutions to have established a target CET1 ratio of 7%, comprised of the 2019 all-in minimum ratio plus a conservation buffer effective the first quarter of 2013. For the Tier 1 and Total capital ratios, the all-in targets are 8.5% and 10.5%, respectively, effective the first quarter of 2014. "All-in" is defined by OSFI as capital calculated to include all of the regulatory adjustments that will be required by 2019, but retaining the phase-out rules for non-qualifying capital instruments. Certain deductions from CET1 capital are phased in at 20% per year from 2014. Amounts not yet deducted from capital under OSFI's transitional rules are risk weighted, creating a difference between RWAs on a transitional and all-in basis.

A comparison of the BCBS transitional capital ratio requirements and the OSFI all-in target capital ratio requirements is as follows.

To view "Transitional basis (BCBS)" and "All-in basis (OSFI)" chart, please click http://files.newswire.ca/256/CIBC1.pdf

CET1 capital includes common shares, retained earnings and AOCI (excluding AOCI relating to cash flow hedges), less regulatory adjustments for items such as goodwill and other intangible assets, deferred tax assets, assets related to defined benefit pension plans as reported on our consolidated balance sheet, and certain investments. Additional Tier 1 capital primarily includes preferred shares and innovative Tier 1 notes, and Tier 2 capital consists primarily of subordinated debentures, subject to phase-out rules for capital instruments that are non-qualifying.

OSFI has released its guidance on domestic systemically important banks (D-SIBs) and the associated capital surcharge. CIBC is considered to be a D-SIB in Canada along with the Bank of Montreal, the Bank of Nova Scotia, the National Bank of Canada, the Royal Bank of Canada, and TD. D-SIBs will be subject to a 1% CET1 surcharge commencing January 1, 2016.

Basel leverage ratio requirement
The Basel III capital reforms included a non-risk-based capital metric, the leverage ratio, to supplement risk-based capital requirements. On January 12, 2014, the BCBS issued the full text of its leverage ratio framework.

The leverage ratio is defined as the Capital Measure (Tier 1 capital) divided by the Exposure Measure. The Exposure Measure includes the sum of:

(i)      On-balance sheet assets;
(ii)      Adjustments for securities financing transaction exposures with a limited form of netting available if certain conditions are met;
(iii)      Derivative exposures as specified under the rules; and
(iv)      Other off-balance sheet exposures, such as credit commitments and direct credit substitutes, converted into credit exposure equivalents using Basel Standardized Approach credit conversion factors.

Items deducted from Tier 1 capital will be excluded from the Exposure Measure.

The BCBS requires banks to disclose their leverage ratio beginning in 2015. The document states that the BCBS will continue to test whether a minimum requirement of 3% for the leverage ratio is appropriate. Any final adjustments to the rule will be made by 2017, for implementation on January 1, 2018.

OSFI has indicated that it will issue a new leverage guideline later this year. The guideline will be effective in January 2015 and will replace the current assets-to-capital multiple (ACM) test with the Basel III leverage ratio test. Federally regulated deposit-taking institutions will be expected to have Basel III leverage ratios in excess of 3%.

Continuous enhancement to risk-based capital requirements
Last year the BCBS published a number of proposals for changes to the existing risk-based capital requirements (see page 30 of the 2013 Annual Report), and continues to do so with the objective of clarifying and increasing the capital requirements for certain business activities. In addition to the leverage ratio document discussed above, since the start of the fiscal year, the BCBS has published an updated proposal: "Revisions to the securitisation framework - consultative document", and finalized three standards for implementation in 2017 as discussed below.

"Capital requirements for banks' equity investments in funds - final standard" was published in December 2013. The final revised framework applies to banks' investments in the equity of funds that are held in the banking book. The implementation date is January 1, 2017. Banks should look-through to the underlying assets of the fund in order to more properly reflect the risk of those investments.

In addition to the above, the BCBS has also recently finalized two other standards which will be implemented on January 1, 2017. "The standardized approach for measuring counterparty credit risk exposures" provides a non-modelled approach to the treatment of derivatives-related transactions, which will replace both the existing Current Exposure and Standardized Methods.

"Capital requirements for bank exposures to central counterparties" sets out the rules for calculating regulatory capital for bank exposures to central counterparties, and will replace interim requirements published in July 2012.

Regulatory capital
Our capital ratios and ACM are presented in the table below: 

                  2014       2014       2013  
$ millions, as at               Apr. 30       Jan. 31       Oct. 31  
Transitional basis                                  
CET1 capital             $ 16,532     $ 16,705     $ 16,698  
Tier 1 capital               18,076       17,851       17,830  
Total capital               21,581       21,295       21,601  
RWA               152,044       153,245       151,338  
CET1 ratio               10.9 %     10.9 %     11.0 %
Tier 1 capital ratio               11.9 %     11.6 %     11.8 %
Total capital ratio               14.2 %     13.9 %     14.3 %
ACM               18.1 x     18.4 x     18.0 x
All-in basis                                  
CET1 capital             $ 13,641     $ 13,347     $ 12,793  
Tier 1 capital               16,488       16,189       15,888  
Total capital               20,206       19,890       19,961  
RWA               135,883       140,505       136,747  
CET1 ratio               10.0 %     9.5 %     9.4 %
Tier 1 capital ratio               12.1 %     11.5 %     11.6 %
Total capital ratio               14.9 %     14.2 %     14.6 %

CET1 ratio (All-in basis)
CET1 ratio increased 0.5% from January 31, 2014. During the quarter, CET1 capital after regulatory adjustments increased. While the earnings were impacted by the write-down of the CIBC FirstCaribbean goodwill, its impact on the CET1 capital was neutral. RWAs decreased by $4.6 billion from January 31, 2014 as a result of refinements to the treatment of our over-the-counter (OTC) derivatives, reductions in our AFS portfolios, and positive impacts from foreign exchange and interest rates.

CET1 ratio increased 0.6% from October 31, 2013. CET1 capital increased due to internal capital generation (net income less dividends and shares repurchased for cancellation) and a reduction in regulatory deductions such as the pension related deduction. While the earnings were impacted by the write-down of CIBC FirstCaribbean goodwill, its impact on the capital was neutral. The ratio also benefited from a decline in RWAs during the same period. RWAs decreased $0.8 billion during the six months ended April 30, 2014. RWAs decreased due to the sale of the Aeroplan portfolio, portfolio quality improvements, and increasing portfolio insurance, refinements to the treatment of our OTC derivatives, and reductions in our AFS portfolios. These factors were largely offset by foreign exchange, commencement of the phase-in of the credit valuation charge in the first quarter of 2014, refinements to the calculation of RWA in our retail lending portfolio, and business growth.

ACM
The ACM decreased 0.3 times from January 31, 2014, primarily due to an increase in capital.

The ACM increased 0.1 times from October 31, 2013. Capital for ACM purposes decreased due to an additional 10% reduction in the inclusion of non-qualifying capital instruments, while gross assets for ACM purposes increased.

Significant capital management activity

Normal course issuer bid
On September 5, 2013, we announced that the Toronto Stock Exchange had accepted the notice of CIBC's intention to commence a new normal course issuer bid. Purchases under this bid commenced on September 18, 2013 and will terminate upon the earlier of (i) CIBC purchasing up to a maximum of 8 million common shares, (ii) CIBC providing a notice of termination, or (iii) September 8, 2014.

During the quarter ended April 30, 2014, we purchased and cancelled an additional 914,600 common shares under this bid at an average price of $92.89 for a total amount of $85 million. For the six months ended April 30, 2014, we purchased and cancelled 2,329,700 common shares under this bid at an average price of $91.05 for a total amount of $212 million. Since the inception of this bid, we have purchased and cancelled 3,253,600 common shares at an average price of $88.87 for a total amount of $289 million.

Dividends
On May 28, 2014, the Board of Directors approved an increase in our quarterly common share dividend from $0.98 per share to $1.00 per share from the quarter ending July 31, 2014.

Our quarterly common share dividend was increased from $0.96 per share to $0.98 per share from the quarter ended April 30, 2014.

Preferred shares
On April 30, 2014, we redeemed all of our 13 million Non-cumulative Rate Reset Class A Series 35 Preferred Shares with a par value and redemption price of $25.00 per share for cash.

Off-balance sheet arrangements
We enter into off-balance sheet arrangements in the normal course of our business. We consolidate all of our sponsored trusts that securitize our own assets with the exception of the commercial mortgage securitization trust.

We sponsor a single-seller conduit and several multi-seller conduits (collectively, the conduits) in Canada.

As at April 30, 2014, the underlying collateral for various asset types in our non-consolidated sponsored multi-seller conduits amounted to $2.1 billion (October 31, 2013: $2.1 billion). The estimated weighted-average life of these assets was 1 year (October 31, 2013: 1.1 years). Our holdings of commercial paper issued by our non-consolidated sponsored multi-seller conduits that offer commercial paper to external investors were $6 million (October 31, 2013: $9 million). Our committed backstop liquidity facilities to these conduits were $3.6 billion (October 31, 2013: $3.2 billion). We also provided credit facilities of $30 million (October 31, 2013: $30 million) to these conduits as at April 30, 2014.

We participated in a syndicated facility for a 3-year commitment of $575 million to our single-seller conduit that provides funding to franchisees of a major Canadian retailer. Our portion of the commitment was $105 million (October 31, 2013: $110 million). As at April 30, 2014, we funded $95 million (October 31, 2013: $81 million) through the issuance of bankers' acceptances.

                        2014                 2013  
$ millions, as at                     Apr. 30                 Oct. 31  
                  Undrawn                 Undrawn        
                  liquidity     Written           liquidity     Written  
            Investment     and credit     credit     Investment     and credit     credit  
            and loans (1)   facilities     derivatives (2)   and loans (1)   facilities     derivatives (2)
CIBC-sponsored conduits       $ 101   $ 2,083   $ -   $ 90   $ 2,151   $ -  
CIBC-structured CDO vehicles         103     46     145     135     43     134  
Third-party structured vehicles                                          
  Structured credit run-off         3,100     119     2,435     3,456     236     2,966  
  Continuing         1,106     840     -     756 (3)   534 (3)   -  
Pass-through investment structures         2,639     -     -     3,090     -     -  
Commercial mortgage securitization trust         12     -     -     5     -     -  
(1) Excludes securities issued by, retained interest in, and derivatives with entities established by Canada Mortgage and Housing Corporation
(CMHC), Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Government
National Mortgage Association (Ginnie Mae), Federal Home Loan Banks, Federal Farm Credit Bank, and Student Loan Marketing
Association (Sallie Mae). $2.5 billion (October 31, 2013: $3.0 billion) of the exposures related to CIBC-structured vehicles and third-party
structured vehicles - structured credit run-off were hedged.
(2) The negative fair value recorded on the interim consolidated balance sheet was $315 million (October 31, 2013: $368 million). Notional of
$2.1 billion (October 31, 2013: $2.7 billion) was hedged with credit derivatives protection from third parties. The fair value of these hedges
net of CVA was $199 million (October 31, 2013: $213 million). An additional notional of $147 million (October 31, 2013: $161 million) was
hedged through a limited recourse note. Accumulated fair value losses were $8 million (October 31, 2013: $15 million) on unhedged
written credit derivatives.
(3) Restated to include certain revolving loans and associated unutilized credit commitments.

Additional details of our structured entities are provided in Note 7 to the interim consolidated financial statements. Details of our other off-balance sheet arrangements are provided on pages 36 and 37 of the 2013 Annual Report.

Management of risk

Our approach to management of risk, and our governance structure, have not changed significantly from that described on pages 38 to 72 of the 2013 Annual Report. Certain disclosures in this section have been shaded as they are required under IFRS 7 "Financial Instruments - Disclosures" and form an integral part of the interim consolidated financial statements.

Risk overview
Most of CIBC's business activities involve, to a varying degree, a variety of risks, and effective management of risks is fundamental to CIBC's success. Our objective is to balance the level of risk with our business objectives for growth and profitability in order to achieve consistent and sustainable performance while remaining within our risk appetite.

Our risk appetite defines tolerance levels for various risks. This is the foundation for our risk management culture, and our risk management framework. Our risk management framework includes:

  • The Board-approved risk appetite statement;
  • Risk policies, procedures and limits to align activities with our risk appetite;
  • Regular risk reports to identify and communicate risk levels;
  • An independent control framework to identify and test compliance with key controls;
  • Stress testing to consider potential impacts of changes in the business environment on capital, liquidity and earnings;
  • Proactive consideration of risk mitigation options in order to optimize results; and
  • Oversight through our risk-focused committees and governance structure.

Managing risk is a shared responsibility at CIBC. Business units and risk management professionals work in collaboration to ensure that business strategies and activities are consistent with our risk appetite. CIBC's approach to enterprise-wide risk management aligns with the three lines of defence model:

(1)    CIBC's lines of business are responsible for all risks associated with their activities - this is the first line of defence;
(2)    As the second line of defence, CIBC's risk management, compliance and other control functions are responsible for independent oversight of the enterprise-wide risks inherent in CIBC's business activities; and
(3)    As the third line of defence, CIBC's Internal Audit function provides an independent assessment of the design and operating effectiveness of risk management controls, processes and systems.

We continuously monitor our risk profile against our defined risk appetite and related limits, taking actions as needed to maintain an appropriate balance of risk and return. Monitoring our risk profile includes forward-looking analysis of sensitivity to local and global market factors, economic conditions, and political and regulatory environments that influence our overall risk profile.

Regular and transparent risk reporting and discussion at senior management committees facilitate communication of risks and discussion of risk management strategies across the organization.

Additional information on our risk governance, risk management process and risk culture are provided on pages 39 to 43 of the 2013 Annual Report.

Risk management structure
The Risk Management group, led by our Chief Risk Officer, is responsible for setting risk strategies and for providing independent oversight of the businesses. Risk Management works to identify, assess, mitigate, monitor and control the risks associated with business activities and strategies, and is responsible for providing an effective challenge to the lines of businesses.

There were changes made during the year to the Risk Management structure. The current structure is illustrated below.

To view the "Risk Management Structure" chart, please click http://files.newswire.ca/256/CIBC2.pdf

The Risk Management group performs several important activities including:

  • Developing CIBC's risk appetite and associated management control metrics;
  • Setting risk strategy to manage risks in alignment with our risk appetite and business strategy;
  • Establishing and communicating risk policies, procedures and limits to control risks in alignment with risk strategy;
  • Measuring, monitoring and reporting on risk levels;
  • Identifying and assessing emerging and potential strategic risks; and
  • Deciding on transactions that fall outside of risk limits delegated to business lines.

The ten key groups within Risk Management, independent of the originating businesses, contribute to our management of risk:

  • Global Regulatory Affairs and Risk Control - This team provides expertise in risk, controls and regulatory reporting, and oversees regulatory interactions across CIBC to ensure coordinated communication and the effective development of and adherence to action plans.
  • Capital Markets Risk Management - This unit provides independent oversight of the measurement, monitoring and control of market risks (both trading and non-trading), and trading credit risk across CIBC's portfolios.
  • Balance Sheet, Liquidity and Pension Risk Management - This unit has primary global accountability for providing an effective challenge and sound risk oversight to the treasury/liquidity management function within CIBC.
  • Global Credit Risk Management - This unit is responsible for the adjudication and oversight of credit risks associated with our commercial and wholesale lending activities globally, management of the risks in our investment portfolios, as well as management of special loan portfolios.
  • Wealth Risk Management - This unit is responsible for the independent governance and oversight of the wealth management business/activities in CIBC globally.
  • Retail Lending Risk Management - This unit primarily oversees the management of credit and fraud risk in the retail lines of credit and loans, residential mortgage, and small business loan portfolios, including the optimization of credit portfolio quality.
  • Card Products Risk Management - This unit oversees the management of credit risk in the card products portfolio, including the optimization of credit portfolio quality.
  • Global Operational Risk Management - This team has global accountability for the identification, measurement and monitoring of all operational risks, including locations, people, insurance, technology, subsidiaries/affiliates and vendors.
  • Enterprise Risk Management - This unit is responsible for enterprise-wide analysis, including enterprise-wide stress testing and reporting, risk systems and models, as well as economic capital methodologies.
  • Special Initiatives - This unit is responsible for assisting in the design, delivery and implementation of new initiatives aligned with Risk Management's strategic plan, while enhancing internal client partnerships and efficiency.

Top and emerging risks
We monitor and review top and emerging risks that may affect our future results, and take action to mitigate potential risks if required. We perform an in-depth analysis, which can include stress testing our exposures relative to the risks, and provide updates and related developments to the Board on a regular basis. The main top and emerging risks that we consider with potential negative implications, that are material for CIBC, have not changed significantly from those described on pages 43 to 44 of the 2013 Annual Report.

Risks arising from business activities
The chart below shows our business activities and related risk measures based upon regulatory RWAs and economic capital as at April 30, 2014:

To view the chart, please click http://files.newswire.ca/256/CIBC3.pdf

Credit risk
Credit risk is defined as the risk of financial loss due to a borrower or counterparty failing to meet its obligations in accordance with contractual terms.

Credit risk arises mainly from our Retail and Business Banking and our Wholesale lending businesses. Other sources of credit risk include our trading activities, including our OTC derivatives, debt securities, and our repo-style transaction activity. In addition to losses on the default of a borrower or counterparty, unrealized gains or losses may occur due to changes in the credit spread of the counterparty, which could impact the carrying or fair value of our asset.

Exposure to credit risk

            2014         2013
$ millions, as at           Apr. 30         Oct. 31
Business and government portfolios-advanced internal ratings-based (AIRB) approach                      
Drawn       $   85,826     $   84,016
Undrawn commitments           37,655         35,720
Repo-style transactions           58,451         57,975
Other off-balance sheet           69,577         51,885
OTC derivatives           13,155         13,255
Gross exposure at default (EAD) on business and government portfolios           264,664         242,851
Less: repo collateral           53,220         51,613
Net EAD on business and government portfolios           211,444         191,238
Retail portfolios-AIRB approach                      
Drawn           194,444         195,796
Undrawn commitments           63,965         65,424
Other off-balance sheet           290         417
Gross EAD on retail portfolios           258,699         261,637
Standardized portfolios           11,808         10,798
Securitization exposures           15,195         16,799
Gross EAD       $   550,366     $   532,085
Net EAD       $   497,146     $   480,472

Forbearance policy
We employ forbearance techniques to manage customer relationships and to minimize credit losses due to default, foreclosure or repossession. In certain circumstances, it may be necessary to modify a loan for economic or legal reasons related to a borrower's financial difficulties and we may grant a concession in the form of below-market rates or terms that would not otherwise be considered, for the purpose of maximizing recovery of our exposure to the loan. In circumstances where the concession is considered below market, the modification is reported as a troubled debt restructuring (TDR). TDRs are subject to our normal quarterly impairment review which considers, amongst other factors, covenants and/or payment delinquencies. An appropriate level of loan loss provision by portfolio segment is then established.

In retail lending, forbearance techniques include interest capitalization, amortization amendments and debt consolidations. We have a set of eligibility criteria which allow our Client Account Management team to determine suitable remediation strategies and propose products based on each borrower's situation. These solutions are intended to increase the ability of borrowers to service their obligation by providing often more favourable conditions than those originally provided.

The solutions available to corporate and commercial clients vary based on the individual nature of the client's situation and are undertaken selectively where it has been determined that the client has or is likely to have repayment difficulties servicing its obligations. Covenants often reveal changes in the client's financial situation before there is a change in payment behaviour and typically allow for a right to reprice or accelerate payments. Solutions may be temporary in nature or may involve other special management options.

During the quarter and six months ended April 30, 2014, $48 million and $68 million, respectively ($16 million and $19 million for the quarter and six months ended April 30, 2013, respectively) of loans have undergone TDR.

Real estate secured personal lending
Real estate secured personal lending comprises residential mortgages and personal loans and lines secured by residential property (HELOC). This portfolio is low risk as we have a first charge on the majority of the properties, and second lien on only a small portion of the portfolio. We use the same lending criteria in the adjudication of both first lien and second lien loans.

The following table provides details on our Canadian and international residential mortgage and HELOC portfolios. Our international portfolio comprises CIBC FirstCaribbean.

        Residential mortgages     HELOC (1)   Total
$ billions, as at April 30, 2014         Insured       Uninsured   Uninsured   Insured     Uninsured
Ontario       $ 46.9     69 %     $   21.3     31 %   $   9.4     100 %   $ 46.9     60 %     $   30.7     40 %
British Columbia         19.0     64           10.5     36         3.9     100       19.0     57           14.4     43  
Alberta         17.2     75           5.8     25         2.7     100       17.2     67           8.5     33  
Quebec         7.8     72           3.0     28         1.5     100       7.8     64           4.5     36  
Other         11.9     77           3.6     23         1.8     100       11.9     69           5.4     31  
Canadian portfolio (2)(3)         102.8     70           44.2     30         19.3     100       102.8     62           63.5     38  
International portfolio (2)         -     -           2.2     100         -     -       -     -           2.2     100  
Total portfolio       $ 102.8     69 %     $   46.4     31 %   $   19.3     100 %   $ 102.8     61 %     $   65.7     39 %
October 31, 2013 (4)       $ 102.6     71 %     $   42.9     29 %   $   19.3     100 %   $ 102.6     62 %     $   62.2     38 %
(1) We did not have any insured HELOCs as at April 30, 2014 and October 31, 2013.
(2) Geographical allocation is based on the address of the property managed.
(3) 93% (October 31, 2013: 94%) of insurance on Canadian residential mortgages is provided by CMHC and the remaining by two
private Canadian insurers, both rated at least AA (low) by DBRS.
(4) Excludes international portfolio.

 

The average loan-to-value (LTV) ratios(1) for our uninsured Canadian residential mortgages and HELOCs originated during the quarter and period to-date are provided in the following table. The LTV ratio(1) of our uninsured international residential mortgages originated during the quarter was 63%. We did not originate HELOCs for our international portfolio during the quarter. We did not acquire uninsured residential mortgages and HELOCs from a third party for the periods presented in the table below.

                                For the three               For the six  
                                months ended               months ended  
    2014     2014     2013     2014       2013  
    Apr. 30     Jan. 31     Apr. 30     Apr. 30       Apr. 30  
  Residential             Residential             Residential             Residential             Residential          
  mortgages       HELOC     mortgages       HELOC     mortgages       HELOC     mortgages       HELOC     mortgages       HELOC  
Ontario 71 %     70 %   71 %     70 %   71 %     70 %     71 %     70 %     71 %     70 %
British Columbia 67       66     66       65     67       66       66       66       67       66  
Alberta 73       72     72       71     71       70       73       71       72       70  
Quebec 73       72     72       72     72       71       72       72       72       71  
Other 74       73     74       73     73       72       74       73       73       72  
Total Canadian portfolio (2) 71 %     70 %   70 %     70 %   71 %     69 %     71 %     70 %     71 %     69 %
(1) LTV ratios for newly originated residential mortgages and HELOCs are calculated based on weighted average.
(2) Geographical allocation is based on the address of the property managed.

The following table provides the average LTV ratios on our total Canadian residential mortgage portfolio:

                                  Insured         Uninsured  
April 30, 2014 (1)                                 59  %       60  %
October 31, 2013 (1)                                 59  %       60  %
(1) LTV ratios for residential mortgages are calculated based on weighted average. The house price estimates for October 31, 2013 and April 30, 2014 are based on Teranet - National Bank National Composite House Price Index (Teranet) as of September 30, 2013 and March 31, 2014, respectively. Teranet is an independent estimate of the rate of change of Canadian home prices. The sale prices are based on the property records of public land registries. The monthly indices cover eleven Canadian metropolitan areas which are combined to form a national composite index.

The tables below summarize the remaining amortization profile of our total Canadian and international residential mortgages. The first table provides the remaining amortization periods based on the minimum contractual payment amounts. The second table provides the remaining amortization periods based upon current customer payment amounts, which incorporate payments larger than the minimum contractual amount and/or higher frequency of payments.

Contractual payment basis                                                                  
        Less than     5-10     10-15     15-20     20-25     25-30     30-35     35 years
        5 years     years     years     years     years     years     years     and above
Canadian portfolio                                                                  
      April 30, 2014       - %     1 %     3 %     11 %     20 %     44 %     21 %     - %
      October 31, 2013       1 %     1 %     3 %     12 %     19 %     39 %     25 %     - %
International portfolio                                                                  
      April 30, 2014       7 %     16 %     24 %     26 %     17 %     8 %     2 %     - %
                                                                   
Current customer payment basis                                                                  
        Less than     5-10     10-15     15-20     20-25     25-30     30-35     35 years
        5 years     years     years     years     years     years     years     and above
Canadian portfolio                                                                  
      April 30, 2014       3 %     6 %     11 %     14 %     26 %     30 %     10 %     - %
      October 31, 2013       3 %     6 %     11 %     15 %     24 %     28 %     12 %     1 %
International portfolio                                                                  
      April 30, 2014       7 %     16 %     24 %     26 %     16 %     8 %     2 %     1 %

We have two types of condominium exposures in Canada: mortgages and developer loans. Both are primarily concentrated in the Toronto and Vancouver areas. As at April 30, 2014, our Canadian condominium mortgages were $16.7 billion (October 31, 2013: $16.6 billion) of which 73% (October 31, 2013: 74%) were insured. Our drawn developer loans were $791 million (October 31, 2013: $920 million) or 2% of our business and government portfolio and our related undrawn exposure was $1.8 billion (October 31, 2013: $2.1 billion). The condominium developer exposure is diversified across 73 projects.

We stress test our mortgage and HELOC portfolio to determine the potential impact of different economic events. Our stress tests can use variables such as GDP, unemployment, bankruptcy rates, debt service ratios and delinquency trends, which are reflective of potential ranges of housing price declines, to model potential outcomes for a given set of circumstances. The stress testing involves variables that could behave differently in certain situations. Our main tests use economic variables that are more severe than in the early 1980s and early 1990s when Canada experienced economic downturns. Our results show that in an economic downturn, our strong capital position should be sufficient to absorb mortgage and HELOC losses.

Counterparty credit exposure
We have counterparty credit exposure that arises from our interest rate, foreign exchange, equity, commodity, and credit derivatives trading, hedging, and portfolio management activities, as explained in Note 12 of the 2013 annual consolidated financial statements.

The following table shows the rating profile of OTC derivative MTM receivables (after derivative master netting agreements, but before any collateral): 

                                2014                 2013  
$ billions, as at                               Apr. 30                 Oct. 31  
                      Exposure (1)
Investment grade                     $     5.08   84.9 %     $     4.59   85.0 %
Non-investment grade                           0.90   14.9             0.78   14.5  
Watchlist                           0.01   0.1             0.03   0.5  
Unrated                           0.01   0.1             -   -  
                      $     6.00   100.0 %     $     5.40   100.0 %
(1) MTM of the OTC derivative contracts is after the impact of master netting
agreements, but before any collateral.

The following table provides details of our impaired loans and allowances for credit losses.

                                    As at or for the three
months ended
                    As at or for the six
months ended
  2014 2014 2013     2014 2013
$ millions Apr. 30 Jan. 31 Apr. 30     Apr. 30 Apr. 30
    Business and             Business and           Business and               Business and           Business and            
    government   Consumer       government   Consumer       government   Consumer         government   Consumer     government   Consumer      
    loans   loans     Total loans   loans     Total loans   loans     Total   loans   loans     Total loans   loans     Total
Gross impaired
loans (GIL)
                                                                                   
Balance at beginning
of period
$ 841   $ 746   $ 1,587 $ 843   $ 704   $ 1,547 $ 992   $ 757   $ 1,749     $ 843   $ 704   $ 1,547 $ 1,128   $ 739   $ 1,867
  Classified as impaired                                                                                    
  during the period   46     291     337   65     352     417   112     369     481       111     643     754   177     745     922
  Transferred to not
impaired during
                                                                                   
  the period   (2)     (31)     (33)   (3)     (20)     (23)   (2)     (16)     (18)       (5)     (51)     (56)   (4)     (31)     (35)
  Net repayments   (50)     (54)     (104)   (85)     (60)     (145)   (56)     (106)     (162)       (135)     (114)     (249)   (188)     (179)     (367)
  Amounts written-off   (34)     (214)     (248)   (22)     (255)     (277)   (121)     (247)     (368)       (56)     (469)     (525)   (188)     (516)     (704)
  Recoveries of loans                                                                                      
  and advances
previously written off
  -     -     -   -     -     -   -     -     -       -     -     -   -     -     -
  Disposals of loans   -     -     -   -     -     -   -     -     -       -     -     -   -     -     -
  Foreign exchange
and other
  (11)     (7)     (18)   43     25     68   6     4     10       32     18     50   6     3     9
Balance at end of period $ 790   $ 731   $ 1,521 $ 841   $ 746   $ 1,587 $ 931   $ 761   $ 1,692     $ 790   $ 731   $ 1,521 $ 931   $ 761   $ 1,692
Allowance for
impairment (1)
                                                                                   
Balance at beginning
of period
$ 348   $ 227   $ 575 $ 323   $ 224   $ 547 $ 458   $ 233   $ 691     $ 323   $ 224   $ 547 $ 492   $ 229   $ 721
  Amounts written-off   (34)     (214)     (248)   (22)     (255)     (277)   (121)     (247)     (368)       (56)     (469)     (525)   (188)     (516)     (704)
  Recoveries of
amounts written-off
                                                                                   
  in previous periods   3     47     50   5     45     50   3     43     46       8     92     100   6     84     90
  Charge to income
statement
  59     263     322   36     207     243   68     219     287       95     470     565   103     453     556
  Interest accrued
on impaired loans
  (2)     (6)     (8)   (6)     (3)     (9)   (5)     (4)     (9)       (8)     (9)     (17)   (11)     (7)     (18)
  Disposals of loans   -     -     -   -     -     -   -     -     -       -     -     -       -     -
  Foreign exchange
and other
  (6)     (12)     (18)   12     9     21   -     3     3       6     (3)     3   1     4     5
Balance at end of period $ 368   $ 305   $ 673 $ 348   $ 227   $ 575 $ 403   $ 247   $ 650     $ 368   $ 305   $ 673 $ 403   $ 247   $ 650
Net impaired loans                                                                                    
Balance at beginning
of period
$ 493   $ 519   $ 1,012 $ 520   $ 480   $ 1,000 $ 534   $ 524   $ 1,058     $ 520   $ 480   $ 1,000 $ 636   $ 510   $ 1,146
  Net change in gross
impaired
  (51)     (15)     (66)   (2)     42     40   (61)     4     (57)       (53)     27     (26)   (197)     22     (175)
  Net change in
allowance
  (20)     (78)     (98)   (25)     (3)     (28)   55     (14)     41       (45)     (81)     (126)   89     (18)     71
Balance at end of period $ 422   $ 426   $ 848 $ 493   $ 519   $ 1,012 $ 528   $ 514   $ 1,042     $ 422   $ 426   $ 848 $ 528   $ 514   $ 1,042
GIL less allowance for
impairment  
                                                                                   
  as a percentage of
related assets (2)
              0.30%               0.36%               0.37%                   0.30%               0.37%
(1) Includes collective allowance relating to personal, scored small business and mortgage impaired loans that are greater than 90 days delinquent, and individual allowance.
(2) The related assets include loans, securities borrowed or purchased under resale agreements, and acceptances.

Gross impaired loans
As at April 30, 2014, gross impaired loans were down $171 million from April 30, 2013 and down $66 million from January 31, 2014. 

The decrease in the gross impaired loans as compared to the same period last year was primarily due to a decrease in the personal lending portfolio as a result of a revision of estimated loss parameters implemented in the third quarter of 2013, and decreases in the publishing, printing and broadcasting, business services, and real estate and construction sectors in business and government loans.

The decrease in the gross impaired loans as compared to the prior quarter was primarily due to decreases in residential mortgages in consumer loans, and the business services sector in business and government loans.

After experiencing an increase during the 2009 recession, GIL stabilized in 2011 and showed some improvements in 2012, 2013 and the first half of 2014. Almost half of the consumer GIL in this quarter were from Canada, in which insured mortgages accounted for the majority, and where losses are expected to be minimal. The remaining consumer GIL were in CIBC FirstCaribbean. GIL in business and government loans were down from both the prior quarter and the same quarter last year due to improvements in the credit quality of the overall business and government portfolio, as well as write-offs of U.S. real estate finance accounts originated before 2009 and write-offs of impaired accounts across other various sectors.

Allowance for Impairment
The allowance for impairment was $673 million, up $23 million or 4% from the same quarter last year.

The individually assessed allowance for business and government loans decreased by $21 million or 6%, mainly relating to decreases in the publishing, printing and broadcasting, and real estate and construction sectors, partially offset by an increase in the transportation sector in the U.S. leveraged finance portfolio. The decrease in the real estate and construction sector was primarily in the U.S. The decrease in the publishing, printing and broadcasting sector was attributable to the write-off of an account in the fourth quarter of 2013. The individually assessed allowance for consumer loans was comparable with the same quarter last year. The collectively assessed allowance for business and government loans was down $14 million due to a revision of estimated loss parameters on unsecured lending portfolios implemented in the third quarter of 2013.

The collectively assessed allowance for consumer loans was up $58 million or 24%, due to an increase in the residential mortgage portfolio of CIBC FirstCaribbean, reflecting revised expectations on the extent and timing of the anticipated economic recovery in the Caribbean region, partially offset by a decrease resulting from the revision of estimated loss parameters on unsecured lending portfolios noted above.

The allowance for impairment was up $98 million or 17% from the prior quarter.

The individually assessed allowance for business and government loans increased by $23 million or 7%, largely due to an increase in the transportation sector in the U.S. leveraged finance portfolio. The individually assessed allowance for consumer loans was comparable with the prior quarter.

The collectively assessed allowance for business and government loans was comparable with the prior quarter. The collectively assessed allowance for consumer loans was up $78 million or 36%, mainly due to an increase in the residential mortgage portfolio of CIBC FirstCaribbean, as noted above.

Exposure to certain countries and regions
Several European countries, especially Greece, Ireland, Italy, Portugal, and Spain, have continued to experience credit concerns. The following tables provide our exposure to these and other European countries, both within and outside the Eurozone. Except as noted in our indirect exposures section below, we do not have any other exposure through our special purpose entities (SPEs) to the countries included in the tables below.

We do not have material exposure to the countries in the Middle East and North Africa that have either experienced or may be at risk of unrest. These countries include Algeria, Bahrain, Egypt, Jordan, Lebanon, Libya, Morocco, Oman, Saudi Arabia, Syria, Tunisia, and Yemen.

Direct exposures to certain countries and regions
Our direct exposures presented in the tables below comprise (A) funded - on-balance sheet loans (stated at amortized cost net of allowances, if any), deposits with banks (stated at amortized cost net of allowances, if any) and securities (stated at fair value); (B) unfunded - unutilized credit commitments, letters of credit, and guarantees (stated at notional amount net of allowances, if any) and sold credit default swap (CDS) contracts where we do not benefit from subordination (stated at notional amount less fair value); and (C) derivative MTM receivables (stated at fair value) and repo-style transactions (stated at fair value).

Of our total direct exposures to Europe, approximately 93% (2013: 96%) is to entities in countries with Aaa/AAA ratings from at least one of Moody's or S&P.

The following tables provide a summary of our positions in this business:

            Direct exposures
            Funded   Unfunded
                                  Total                   Total
                                  funded                   unfunded
$ millions, as at April 30, 2014             Corporate     Sovereign     Bank     (A)     Corporate       Bank     (B)
Austria           $ -   $ -   $ -   $ -   $ -   $   -   $ -
Belgium             3     -     15     18     -       -     -
Finland             202     1     2     205     66       -     66
France             51     -     25     76     226       6     232
Germany             221     17     3     241     13       -     13
Greece             -     -     -     -     -       -     -
Ireland             -     -     -     -     -       -     -
Italy             -     -     -     -     -       -     -
Luxembourg             22     -     167     189     13       -     13
Malta             -     -     -     -     -       -     -
Netherlands             15     127     107     249     -       1     1
Portugal             -     -     -     -     -       -     -
Spain             -     -     1     1     -       -     -
Total Eurozone           $ 514   $ 145   $ 320   $ 979   $ 318   $   7   $ 325
Czech Republic           $ -   $ -   $ -   $ -   $ -   $   -   $ -
Denmark             -     -     1     1     -       9     9
Norway             -     113     116     229     -       -     -
Russia             -     -     -     -     -       -     -
Sweden             217     98     313     628     39       -     39
Switzerland             229     -     121     350     134       -     134
Turkey             -     -     155     155     -       8     8
United Kingdom             632     328     357     1,317     2,136 (1)     242     2,378
Total non-Eurozone           $ 1,078   $ 539   $ 1,063   $ 2,680   $ 2,309   $   259   $ 2,568
Total Europe           $ 1,592   $ 684   $ 1,383   $ 3,659   $ 2,627   $   266   $ 2,893
October 31, 2013           $ 1,610   $ 815   $ 1,548   $ 3,973   $ 1,910   $   220   $ 2,130
(1) Includes $193 million of exposure (notional value of $221 million and fair value of $28 million) on a CDS sold on a bond
issue of a U.K. corporate entity, which is guaranteed by a financial guarantor. We currently hold the CDS sold as part of
our structured credit run-off business. A payout on the CDS sold would be triggered by the bankruptcy of the reference
entity, or a failure of the entity to make a principal or interest payment as it is due; as well as failure of the financial
guarantor to meet its obligation under the guarantee.

 

            Direct exposures (continued)
            Derivative MTM receivables and repo-style transactions     Total
                                              Net     direct
                                  Gross     Collateral     exposure     exposure
$ millions, as at April 30, 2014             Corporate     Sovereign       Bank     exposure (1)   held (2)   (C)     (A)+(B)+(C)
Austria           $ -   $ -   $   25   $ 25   $ 24   $ 1   $ 1
Belgium             -     1       34     35     34     1     19
Finland             1     -       3     4     -     4     275
France             2     291       766     1,059     1,054     5     313
Germany             -     -       2,330     2,330     2,074     256     510
Greece             -     -       -     -     -     -     -
Ireland             -     -       136     136     133     3     3
Italy             -     -       4     4     -     4     4
Luxembourg             -     -       2     2     -     2     204
Malta             -     1       -     1     -     1     1
Netherlands             -     -       109     109     96     13     263
Portugal             -     -       -     -     -     -     -
Spain             -     -       25     25     25     -     1
Total Eurozone           $ 3   $ 293   $   3,434   $ 3,730   $ 3,440   $ 290   $ 1,594
Czech Republic           $ -   $ -   $   -   $ -   $ -   $ -   $ -
Denmark             9     -       5     14     11     3     13
Norway             -     -       93     93     93     -     229
Russia             -     -       1     1     -     1     1
Sweden             1     -       115     116     115     1     668
Switzerland             -     17       1,180     1,197     1,155     42     526
Turkey             -     -       -     -     -     -     163
United Kingdom             254     5       4,255     4,514     4,188     326     4,021
Total non-Eurozone           $ 264   $ 22   $   5,649   $ 5,935   $ 5,562   $ 373   $ 5,621
Total Europe           $ 267   $ 315   $   9,083   $ 9,665   $ 9,002   $ 663   $ 7,215
October 31, 2013           $ 177   $ 317   $   5,336   $ 5,830   $ 5,346   $ 484   $ 6,587
(1) The amounts are shown net of CVA.
(2) Collateral on derivative MTM receivables was $1.6 billion (October 31, 2013: $1.4 billion), collateral on repo-style transactions was
$7.4 billion (October 31, 2013: $4.0 billion), and both are comprised of cash and investment-grade debt securities.

Indirect exposures to certain countries and regions
Our indirect exposures comprise securities (primarily CLOs classified as loans on our consolidated balance sheet), and written credit protection on securities in our structured credit run-off business where we benefit from subordination to our position. Our gross exposure before subordination is stated at carrying value for securities and notional, less fair value for derivatives where we have written protection. We have no indirect exposures to Portugal, Turkey, or Russia.

                        Total
                        indirect
$ millions, as at April 30, 2014                       exposure
Austria                     $ -
Belgium                       35
Finland                       22
France                       335
Germany                       226
Greece                       11
Ireland                       19
Italy                       70
Luxembourg                       84
Malta                       -
Netherlands                       215
Portugal                       -
Spain                       146
Total Eurozone                     $ 1,163
Denmark                     $ 13
Norway                       1
Sweden                       35
Switzerland                       9
United Kingdom                       323
Total non-Eurozone                     $ 381
Total exposure                     $ 1,544
October 31, 2013                     $ 1,888

In addition to the indirect exposures above, we have indirect exposures to European counterparties when we have taken debt or equity securities issued by European entities as collateral for our securities lending and borrowing activity, from entities that are not in Europe. Our indirect exposure was $256 million (October 31, 2013: $211 million).

Selected exposures in certain selected activities

In response to the recommendations of the Financial Stability Board, this section provides information on our other selected activities within our continuing and exited businesses that may be of particular interest to investors based on their risk characteristics and the current market environment. For additional information on these selected exposures, refer to pages 57 to 58 of the 2013 Annual Report.

U.S. real estate finance
The following table provides a summary of our positions in this business:

$ millions, as at April 30, 2014               Drawn       Undrawn
Construction program           $   148     $ 48
Interim program               5,859       370
Permanent program               105       9
Exposure, net of allowance           $   6,112     $ 427
Of the above:                        
  Net impaired           $   97     $ -
  On credit watch list               202       -
Exposure, net of allowance, as at October 31, 2013           $   5,938     $ 467

As at April 30, 2014, the allowance for credit losses for this portfolio was $42 million (October 31, 2013: $55 million). During the quarter ended April 30, 2014, the net reversal of credit losses was $1 million, and during the six months ended April 30, 2014, we recorded provision for credit losses of $2 million ($4 million and $13 million provision for credit losses for the quarter and six months ended April 30, 2013, respectively).

The business also maintains commercial mortgage-backed securities (CMBS) trading and distribution capabilities. As at April 30, 2014, we had CMBS inventory with a notional amount of $9 million and a fair value of less than $1 million (October 31, 2013: notional of $9 million and fair value of less than $1 million).

Leveraged finance
The exposures in our leveraged finance activities in Europe and U.S. are discussed below.

European leveraged finance
The following table provides a summary of our positions in this exited business:

$ millions, as at April 30, 2014               Drawn       Undrawn
Manufacturing - capital goods           $   199     $ 7
Publishing, printing and broadcasting               5       -
Utilities               10       -
Transportation               4       4
Exposure, net of allowance           $   218     $ 11
Of the above:                        
  Net impaired           $   5     $ -
  On credit watch list               176       7
Exposure, net of allowance, as at October 31, 2013 (1)           $   359     $ 28
(1) Excludes $21 million of carrying value relating to equity received pursuant to a
reorganization. We sold this equity investment during the first quarter ended
January 31, 2014.

As at April 30, 2014, the allowance for credit losses for this portfolio was $37 million (October 31, 2013: $35 million). During the quarter and six months ended, April 30, 2014, the net reversal of credit losses was nil and $1 million, respectively (provision for credit losses of $21 million for the quarter and six months ended April 30, 2013, respectively).

U.S. leveraged finance
The following table provides a summary of our positions in this business: 

$ millions, as at April 30, 2014               Drawn       Undrawn
Transportation           $   14     $ -
Publishing, printing and broadcasting               8       -
Exposure, net of allowance           $   22     $ -
Of the above:                        
  Net impaired           $   14     $ -
  On credit watch list               8       -
Exposure, net of allowance, as at October 31, 2013           $   44     $ 4

As at April 30, 2014, the allowance for credit losses for this portfolio was $24 million (October 31, 2013: $2 million). During the quarter and six months ended April 30, 2014, the provision for credit losses was $23 million (net reversal of $5 million and $6 million for the quarter and six months ended April 30, 2013, respectively).

Market risk

Market risk arises from positions in currencies, securities and derivatives held in our trading portfolios, and from our retail banking business, investment portfolios, and other non-trading activities. Market risk is defined as the potential for financial loss from adverse changes in underlying market factors, including interest and foreign exchange rates, credit spreads, and equity and commodity prices.

Risk measurement
The following table provides balances on the interim consolidated balance sheet which are subject to market risk. Certain differences between accounting and risk classifications are detailed in the footnotes below:

                        2014                       2013    
$ millions, as at                     Apr. 30                       Oct. 31    
          Subject to market risk               Subject to market risk          
    Consolidated               Not   Consolidated               Not   Non-traded risk
    balance           Non-   subject to   balance           Non-   subject to   primary risk
  sheet     Trading     trading   market risk   sheet     Trading     trading   market risk   sensitivity
Cash and non-interest-bearing                                                  
  deposits with banks $ 2,873   $ -   $ 1,616   $ 1,257   $ 2,211   $ -   $ 1,165   $ 1,046   Foreign exchange
Interest-bearing deposits with banks   7,815     5     7,810     -     4,168     111     4,057     -   Interest rate
Securities   67,204     44,060 (1)   23,144     -     71,984     43,160 (1)   28,824     -   Equity, interest rate
Cash collateral on securities borrowed   2,891     -     2,891     -     3,417     -     3,417     -   Interest rate
Securities purchased under resale                                                  
  agreements   24,434     -     24,434     -     25,311     -     25,311     -   Interest rate
Loans                                                  
  Residential mortgages   152,569     -     152,569     -     150,938     -     150,938     -   Interest rate
  Personal   34,746     -     34,746     -     34,441     -     34,441     -   Interest rate
  Credit card   11,545     -     11,545     -     14,772     -     14,772     -   Interest rate
  Business and government   52,246     3,923 (2)   48,323     -     48,207     2,148 (2)   46,059     -   Interest rate
  Allowance for credit losses   (1,726)     -     (1,726)     -     (1,698)     -     (1,698)     -   Interest rate
Derivative instruments   19,346     16,762 (3)   2,584     -     19,947     17,626 (3)   2,321     -   Interest rate,
                                                    foreign exchange
Customers' liability under acceptances   9,300     -     9,300     -     9,720     -     9,720     -   Interest rate
Other assets   13,859     1,323     5,882     6,654     14,588     1,226     6,537     6,825   Interest rate, equity,
                                                    foreign exchange
    $ 397,102   $ 66,073   $ 323,118   $ 7,911   $ 398,006   $ 64,271   $ 325,864   $ 7,871    
Deposits $ 314,023   $ 385 (4) $ 279,419   $ 34,219   $ 315,164   $ 388 (4) $ 281,027   $ 33,749   Interest rate
Obligations related to securities                                                  
  sold short   12,263     11,980     283     -     13,327     13,144     183     -   Interest rate
Cash collateral on securities lent   1,236     -     1,236     -     2,099     -     2,099     -   Interest rate
Obligations related to securities sold                                                 Interest rate
  under repurchase agreements   8,411     -     8,411     -     4,887     -     4,887     -   Interest rate
Derivative instruments   18,746     17,106 (3)   1,640     -     19,724     18,220 (3)   1,504     -   Interest rate,
                                                  foreign exchange
Acceptances   9,300     -     9,300     -     9,721     -     9,721     -   Interest rate
Other liabilities   10,653     668     4,286     5,699     10,862     872     4,143     5,847   Interest rate
Subordinated indebtedness   4,226     -     4,226     -     4,228     -     4,228     -   Interest rate
    $ 378,858   $ 30,139   $ 308,801   $ 39,918   $ 380,012   $ 32,624   $ 307,792   $ 39,596    
(1) Excludes structured credit run-off business of $827 million (October 31, 2013: $837 million). These are considered non-trading for market risk purposes.
(2) Excludes $105 million (October 31, 2013: $63 million) of loans that are warehoused for future securitization purposes. These are considered non-trading for market risk purposes.
(3) Excludes derivatives relating to the structured credit and other run-off businesses which are considered non-trading for market risk purposes.
(4) Comprises FVO deposits which are considered trading for market risk purposes.

Trading activities
During the current quarter, we implemented a full revaluation method to compute value at risk (VaR), stressed VaR and the Incremental Risk Charge (IRC) using the historical simulation approach, replacing the parametric approach. In aggregate, this model change resulted in a slight increase in the risk measures. At an individual component level, VaR remained at the same level, stressed VaR decreased slightly and IRC increased.

The following three tables show VaR, stressed VaR and IRC for our trading activities based on risk type under an internal models-based approach.

Trading revenue (TEB) comprises both trading net interest income and non-interest income and excludes underwriting fees and commissions. Trading revenue (TEB) for the purposes of these tables excludes positions described in the "Structured credit run-off business" section of the MD&A and certain other exited portfolios.

Average total VaR for the three months ended April 30, 2014 was down 23% from the last quarter, driven mainly by a decrease in our equity and debt specific risks, partially offset by an increase in interest rate, credit spread, foreign exchange and commodities risks.

Average total stressed VaR for the three months ended April 30, 2014 was up 23% from the last quarter. During the current stressed VaR period from July 1, 2008 to June 29, 2009, the market exhibited not only increased volatility in interest rates but also increased volatility in equity prices combined with a reduction in the level of interest rates, and an increase in credit spreads.

Average incremental risk charge for the three months ended April 30, 2014 was down 8% from the last quarter, mainly due to a decrease in the investment grade trading inventory.

VaR by risk type - trading portfolio

      As at or for the three
months ended
  As at or for the six
months ended
                                  2014             2014             2013     2014     2013
$ millions                               Apr. 30 (1)           Jan. 31             Apr. 30     Apr. 30 (1)   Apr. 30
          High       Low       As at     Average       As at     Average       As at     Average     Average     Average
Interest rate risk     $   3.8   $   1.7   $   3.8   $ 2.7   $   1.6   $ 1.2   $   4.5   $ 4.0   $ 2.0   $ 3.5
Credit spread risk         2.5       1.4       1.7     1.9       1.2     1.1       1.6     1.5     1.5     1.6
Equity risk         3.2       1.3       1.6     1.8       1.9     2.6       2.3     1.9     2.2     2.1
Foreign exchange risk         1.6       0.5       0.8     0.9       0.6     0.6       1.1     1.0     0.7     0.8
Commodity risk         1.9       0.8       1.1     1.3       0.9     0.9       1.5     0.9     1.1     1.0
Debt specific risk         2.7       1.9       2.3     2.4       3.0     2.5       2.6     2.4     2.4     2.5
Diversification effect (2)         n/m       n/m       (7.3)     (7.6)       (4.9)     (4.5)       (8.1)     (6.8)     (6.0)     (6.5)
Total VaR (one-day measure)     $   4.3   $   2.5   $   4.0   $ 3.4   $   4.3   $ 4.4   $   5.5   $ 4.9   $ 3.9   $ 5.0
(1) Beginning in the current quarter, we have implemented the full revaluation method of computing VaR using the historical simulation approach in
place of the parametric VaR approach.
(2) Total VaR is less than the sum of the VaR of the different market risk types due to risk offsets resulting from portfolio diversification effect.
n/m Not meaningful. It is not meaningful to compute a diversification effect because the high and low may occur on different days for different risk types.

Stressed VaR by risk type - trading portfolio

      As at or for the three
months ended
  As at or for the six
months ended
                                  2014             2014             2013     2014     2013
$ millions                               Apr. 30 (1)           Jan. 31             Apr. 30     Apr. 30 (1)   Apr. 30
          High       Low       As at     Average       As at     Average       As at     Average     Average     Average
Interest rate risk     $   9.3   $   4.8   $   7.3   $ 6.7   $   18.0   $ 7.1   $   11.2   $ 8.9   $ 6.9   $ 9.2
Credit spread risk         10.1       6.1       6.8     7.6       7.1     6.8       5.7     4.9     7.2     5.0
Equity risk         14.1       0.7       1.3     1.9       1.1     4.8       3.1     2.6     3.4     2.8
Foreign exchange risk         7.2       0.7       1.0     2.6       0.7     1.0       2.4     1.1     1.8     1.4
Commodity risk         14.1       2.1       14.1     6.6       1.2     3.0       1.6     0.9     4.8     1.1
Debt specific risk         4.4       2.5       3.2     3.2       3.0     2.2       1.2     1.4     2.7     1.4
Diversification effect (2)         n/m       n/m       (22.6)     (16.2)       (15.3)     (14.8)       (12.2)     (10.3)     (15.6)     (10.3)
Total stressed VaR (one-day measure)     $   22.7   $   6.7   $   11.1   $ 12.4   $   15.8   $ 10.1   $   13.0   $ 9.5   $ 11.2   $ 10.6
(1) Beginning in the current quarter, we have implemented the full revaluation method of computing VaR using the historical simulation approach in place of
the parametric VaR approach.
(2) Total stressed VaR is less than the sum of the VaR of the different market risk types due to risk offsets resulting from portfolio diversification effect.
n/m Not meaningful. It is not meaningful to compute a diversification effect because the high and low may occur on different days for different risk types.

Incremental risk charge - trading portfolio

      As at or for the three
months ended
  As at or for the six
months ended 
                                2014             2014             2013     2014     2013
$ millions                               Apr. 30 (1)           Jan. 31             Apr. 30     Apr. 30 (1)   Apr. 30
          High       Low       As at     Average       As at     Average       As at     Average     Average     Average
Default risk     $   98.1   $   64.3   $   68.0   $ 77.6   $   86.6   $ 86.5   $   54.5   $ 47.0   $ 82.0   $ 49.4
Migration risk         56.6       28.5       43.1     42.7       51.3     43.9       26.9     37.4     43.3     39.8
Incremental risk charge (one-year measure)     $   147.6   $   96.1   $   111.1   $ 120.3   $   137.9   $ 130.4   $   81.4   $ 84.4   $ 125.3   $ 89.2
(1) Beginning in the current quarter, we have implemented the full revaluation method of computing VaR using the historical simulation approach in place of the
parametric VaR approach.

Trading revenue
The trading revenue (TEB) versus VaR graph below shows the current quarter and the three previous quarters' actual daily trading revenue (TEB) against the previous day close of business VaR measures. Trading revenue distribution on which VaR is calculated is not on a TEB basis.

During the quarter, trading revenue (TEB) was positive for 100% of the days. During the quarter, the largest gain of $17.9 million occurred on April 22, 2014. It was attributable to the normal course of business within our capital markets group, notably in the equity derivatives business. Average daily trading revenue (TEB) was $4.5 million during the quarter and the average daily TEB was $2.0 million.

Trading revenue (TEB)(1) versus VaR

To view the "Trading revenue (TEB)(1) versus VaR" graph, please click
http://files.newswire.ca/256/CIBC4.pdf

(1) Certain fair value adjustments such as OIS are recorded only at month end but allocated throughout the month for the table above.

Non-trading activities

Interest rate risk
Non-trading interest rate risk consists primarily of risk inherent in asset/liability management activities and the activities of domestic and foreign subsidiaries. Interest rate risk results from differences in the maturities or repricing dates of assets and liabilities, both on- and off-balance sheet, as well as from embedded optionality in retail products. This optionality arises predominantly from the prepayment exposures of mortgage products, mortgage commitments and some GIC products with early redemption features; this optionality is measured consistent with our actual experience. A variety of cash instruments and derivatives, principally interest rate swaps, futures and options, are used to manage and control these risks.

The following table shows the potential impact over the next 12 months, adjusted for structural assumptions (excluding shareholders' equity), estimated prepayments and early withdrawals, of an immediate 100 and 200 basis point increase or decrease in interest rates. In addition, we have a floor in place in the downward shock to accommodate for the current low interest rate environment (i.e. the analysis uses the floor to stop interest rates from going into a negative position in the lower rate scenarios).

Interest rate sensitivity - non-trading (after-tax)

                        2014                 2014                 2013
$ millions, as at                     Apr. 30                 Jan. 31                 Apr. 30
            C$     US$     Other     C$     US$     Other     C$     US$     Other
100 basis points increase in interest rates                                                          
Increase (decrease) in net income                                                          
  attributable to equity shareholders       $ 153   $ (9)   $ 5   $ 150   $ (1)   $ 5   $ 169   $ 1   $ 3
Increase (decrease) in present value of                                                          
  shareholders' equity         22     (116)     (39)     (4)     (141)     (41)     79     (132)     (41)
100 basis points decrease in interest rates                                                          
Increase (decrease) in net income                                                          
  attributable to equity shareholders         (206)     11     (4)     (216)     -     (4)     (228)     (1)     (2)
Increase (decrease) in present value of                                                          
  shareholders' equity         (29)     94     41     (16)     114     42     (172)     100     42
200 basis points increase in interest rates                                                          
Increase (decrease) in net income                                                          
  attributable to equity shareholders       $ 294   $ (17)   $ 10   $ 279   $ (1)   $ 10   $ 330   $ 1   $ 6
Increase (decrease) in present value of                                                          
  shareholders' equity         31     (231)     (79)     (37)     (282)     (81)     120     (264)     (82)
200 basis points decrease in interest rates                                                          
Increase (decrease) in net income                                                          
  attributable to equity shareholders         (424)     12     (7)     (424)     (8)     (7)     (422)     (8)     (5)
Increase (decrease) in present value of                                                          
  shareholders' equity         (167)     128     64     (140)     155     64     (502)     118     64

Liquidity risk
Liquidity risk is the risk of having insufficient cash resources to meet financial obligations as they fall due, in their full amount and stipulated currencies, without raising funds at adverse rates or selling assets on a forced basis.

Our liquidity risk management strategies seek to maintain sufficient liquid financial resources and diversified funding sources to continually fund our balance sheet and contingent obligations under both normal and stressed market environments.

Liquid and encumbered assets
Our policy is to hold a pool of high quality unencumbered liquid assets that will be immediately available to meet outflows determined under the stress scenario. Liquid assets are cash, short-term bank deposits, high quality marketable securities and other assets that can be readily pledged at central banks and in repo markets or converted into cash in a timely fashion. Encumbered assets comprise assets pledged as collateral and other assets that we consider restricted for legal or other reasons. Unencumbered assets comprise assets that are readily available in the normal course of business to secure funding or meet collateral needs and other assets that are not subject to any restrictions on their use to secure funding or as collateral.

Liquid assets net of encumbrances constitute our unencumbered pool of liquid assets and are summarized in the following table:

                                      2014   2013
$ millions, as at                           Apr. 30   Oct. 31
        Gross liquid assets   Encumbered liquid assets (1)   Unencumbered liquid assets
          CIBC owned assets     Third-party assets   CIBC owned assets     Third-party assets            
Cash and deposits with banks       $ 10,636 (2)   $ -   $ 308     $ -   $ 10,328    $ 5,527 
Securities         65,600 (3)     55,596 (4)   17,247       34,415     69,534      77,368 
NHA mortgage-backed securities         55,642 (5)     -     25,143       -     30,499      22,671 
Mortgages         13,480 (6)     -     13,480       -        
Credit cards         4,295 (7)     -     4,295       -        
Other assets         2,675 (8)     -     2,261       -     414      334 
          $ 152,328     $ 55,596   $ 62,734     $ 34,415   $ 110,775    $ 105,900 
(1) Excludes intraday pledges to the Bank of Canada related to the Large Value Transfer System as these are normally released at the end of the settlement
cycle each day.
(2) Comprises cash, non-interest bearing deposits and interest-bearing deposits with contractual maturities of less than 30 days.
(3) Comprises trading, AFS and FVO securities. Excludes securities in our structured credit run-off business, private debt and private equity securities of
$1,604 million (October 31, 2013: $1,621 million).
(4) Comprises $2,891 million (October 31, 2013: $3,417 million) of cash collateral on securities borrowed, $24,434 million (October 31, 2013: $25,311 million)
of securities purchased under resale agreements, $26,150 million (October 31, 2013: $24,157 million) of securities borrowed against securities lent, and
$2,121 million (October 31, 2013: $759 million) of securities received for derivative collateral.
(5) Includes securitized and transferred residential mortgages under the Canada Mortgage Bond and the Government of Canada's Insured Mortgage Purchase
programs, and securitized mortgages that were not transferred to external parties. These are reported in Loans on our interim consolidated balance sheet.
(6) Comprises mortgages included in the Covered Bond Programme.
(7) Comprises assets held in consolidated trusts supporting funding liabilities.
(8) Comprises $2,261 million (October 31, 2013: $2,727 million) of cash pledged for derivatives collateral and $414 million (October 31, 2013: $334 million)
of gold and silver certificates.

In the course of our regular business activities, a portion of our total assets are pledged for collateral management purposes, including those necessary for day-to-day clearing and settlement of payments and securities. For additional details, see Note 22 to the 2013 annual consolidated financial statements.

Our unencumbered liquid assets increased by $4.9 billion or 5% from October 31, 2013, primarily due to a decrease in the encumbrances related to NHA mortgage-backed securities, and higher interest-bearing deposits with banks, partially offset by a decrease in the unencumbered securities.

In addition to the above, we have access to the Bank of Canada Emergency Lending Assistance (ELA) program through the pledging of non-mortgage assets. We do not include ELA borrowing capacity as a source of available liquidity when evaluating surplus liquidity.

The following table summarizes unencumbered liquid assets held by CIBC parent bank and significant subsidiaries:

                            2014         2013
$ millions, as at                         Apr. 30         Oct. 31
CIBC parent bank                     $   82,677     $   78,761
Broker/dealer (1)                         14,953         15,049
Other significant subsidiaries                         13,145         12,090
                      $   110,775     $   105,900
(1) Relates to CIBC World Markets Inc. and CIBC World Markets Corp.

Asset encumbrance
The following table provides a summary of our total encumbered and unencumbered assets:

                                    Encumbered   Unencumbered
                  CIBC owned   Third-party         Pledged as         Available as      
$ millions, as at     assets   assets   Total assets   collateral     Other   collateral     Other
2014      Cash and deposits with banks     $ 10,688   $ -   $ 10,688   $ 11   $ 297   $ 10,380 (1) $ -
Apr. 30     Securities       67,204     -     67,204     17,247     -     48,353     1,604
        Securities borrowed or purchased under                                            
          resale agreements       -     27,325     27,325     14,126     -     13,199     -
        Loans       249,380     -     249,380     42,918     288     30,499     175,675
        Other                                            
          Derivative instruments       19,346     -     19,346     -     -     -     19,346
          Customers' liability under acceptances       9,300     -     9,300     -     -     -     9,300
          Land, buildings and equipment       1,741     -     1,741     -     -     -     1,741
          Goodwill       1,438     -     1,438     -     -     -     1,438
          Software and other intangible assets       897     -     897     -     -     -     897
          Investments in equity-accounted                                            
            associates and joint ventures       1,766     -     1,766     -     -     -     1,766
          Other assets       8,017     -     8,017     2,261     -     414     5,342
                  $ 369,777   $ 27,325   $ 397,102   $ 76,563   $ 585   $ 102,845   $ 217,109
2013      Cash and deposits with banks     $ 6,379   $ -   $ 6,379   $ 11   $ 771   $ 5,597 (1) $ -
Oct. 31     Securities       71,984     -     71,984     14,103     -     56,260     1,621
        Securities borrowed or purchased under                                            
          resale agreements       -     28,728     28,728     17,166     -     11,562     -
        Loans       246,660     -     246,660     50,107     422     22,671     173,460
        Other                                            
          Derivative instruments       19,947     -     19,947     -     -     -     19,947
          Customers' liability under acceptances       9,720     -     9,720     -     -     -     9,720
          Land, buildings and equipment       1,719     -     1,719     -     -     -     1,719
          Goodwill       1,733     -     1,733     -     -     -     1,733
          Software and other intangible assets       756     -     756     -     -     -     756
          Investments in equity-accounted associates                                            
            and joint ventures       1,695     -     1,695     -     -     -     1,695
          Other assets       8,685     -     8,685     2,727     -     334     5,624
                  $ 369,278   $ 28,728   $ 398,006   $ 84,114   $ 1,193   $ 96,424   $ 216,275
(1) Includes $52 million (October 31, 2013: $70 million) of interest-bearing deposits with contractual maturities greater than 30 days.

Funding
We manage liquidity to meet both short- and long-term cash requirements. Reliance on wholesale funding is maintained at prudent levels and within approved limits, consistent with our desired liquidity profile.

Our funding strategy includes access to funding through retail deposits and wholesale funding and deposits. Personal deposits are a significant source of funding and totalled $128.1 billion as at April 30, 2014 (October 31, 2013: $125.0 billion).

The following table provides the contractual maturities at carrying values of funding sourced by CIBC from the wholesale market:

            Less than     1 - 3     3 - 6     6 - 12     Less than     1 - 2     Over      
$ millions, as at April 30, 2014         1 month     months     months     months   1 year total     years     2 years     Total
Deposits from banks       $ 3,444   $ 1,155   $ 150   $ -   $ 4,749   $ -   $ -   $ 4,749
Certificates of deposit and commercial paper         1,159     3,330     4,413     2,491     11,393     5,482     5,914     22,789
Bearer deposit notes and bankers acceptances         4,177     405     781     571     5,934     -     -     5,934
Asset-backed commercial paper         -     -     -     -     -     -     -     -
Senior unsecured medium-term notes         6     2,139     800     4,063     7,008     7,791     13,386     28,185
Senior unsecured structured notes         5     13     124     177     319     223     -     542
Covered bonds/Asset-backed securities                                                    
  Mortgage securitization         -     -     3,368     1,613     4,981     2,595     17,289     24,865
  Covered bonds         -     -     2,299     2,299     4,598     5,231     3,651     13,480
  Cards securitization         -     -     1,096     -     1,096     1,514     1,685     4,295
Subordinated liabilities         -     -     260     -     260     -     3,966     4,226
Other         -     -     -     -     -     -     -     -
        $ 8,791   $ 7,042   $ 13,291   $ 11,214   $ 40,338   $ 22,836   $ 45,891   $ 109,065
Of which:                                                    
  Secured       $ -   $ -   $ 6,763   $ 3,912   $ 10,675   $ 9,340   $ 22,625   $ 42,640
  Unsecured         8,791     7,042     6,528     7,302     29,663     13,496     23,266     66,425
        $ 8,791   $ 7,042   $ 13,291   $ 11,214   $ 40,338   $ 22,836   $ 45,891   $ 109,065
October 31, 2013       $ 11,705   $ 9,081   $ 9,316   $ 15,126   $ 45,228   $ 20,419   $ 55,271   $ 120,918

The following table provides a currency breakdown, in Canadian dollar equivalent, of funding sourced by CIBC in the wholesale market:

                                                       
                        2014         2013  
$ billions, as at                       Apr. 30         Oct. 31  
CAD                     $ 58.9       54 %       $ 69.2       57 %
USD                       43.9       40           44.2       37  
EUR                       1.3       1           1.3       1  
Other                       5.0       5           6.2       5  
                      $ 109.1       100 %       $ 120.9       100 %

Our funding and liquidity levels remained stable and sound over the six months ended April 30, 2014 and we do not anticipate any events, commitments or demands that will materially impact our liquidity risk position.

Impact on collateral if there is a downgrade of CIBC's credit rating
We are required to deliver collateral to certain derivative counterparties in the event of a downgrade to our current credit risk rating. The collateral requirement is based on MTM exposure, collateral valuations, and collateral arrangement thresholds as applicable. The following table presents the additional collateral requirements (cumulative) for rating downgrades:

                          2014         2013
$ billions, as at                       Apr. 30         Oct. 31
One-notch downgrade                     $ 0.1     $   0.1
Two-notch downgrade                       0.3         0.3
Three-notch downgrade                       0.7         0.9

Liquidity Coverage Ratio Disclosure Standards
In January 2014, the BCBS published the Liquidity Coverage Ratio (LCR) Disclosure Standards. The document outlines the minimum standards applicable for public disclosure of the LCR by all internationally active banks. Banks will be required to disclose quantitative information about the LCR using a common template, supplemented by qualitative discussion, as appropriate, on key elements of the liquidity metric. These standards are effective for the first reporting period after January 1, 2015. OSFI has indicated that additional implementation guidance, applicable to Canadian banks, will be provided in due course. We are currently updating processes and systems to meet the stipulated timeline and requirements.

Contractual obligations

Contractual obligations give rise to commitments of future payments affecting our short- and long-term liquidity and capital resource needs. These obligations include financial liabilities, credit and liquidity commitments, and other contractual obligations.

Assets and liabilities
The following table provides the contractual maturity profile of our on-balance sheet assets and liabilities at their carrying values. CIBC models the behaviour of both assets and liabilities on a net cash flow basis by applying recommended regulatory stress assumptions, supplemented by business experience, against contractual maturities and contingent exposures to construct its behavioural balance sheet. The behavioural balance sheet is a key component of CIBC's liquidity risk management framework and is the basis by which CIBC manages its liquidity risk profile.

                                                          No      
        Less than     1 - 3     3 - 6     6 - 9     9 - 12     1 - 2     2 - 5     Over     specified      
$ millions, as at April 30, 2014     1 month     months     months     months     months     years     years     5 years     maturity     Total
Assets                                                              
Cash and non-interest bearing deposits with banks     $ 2,873   $ -   $ -   $ -   $ -   $ -   $ -   $ -   $ -   $ 2,873
Interest bearing deposits with banks       7,763     -     5     47     -     -     -     -     -     7,815
Securities       2,738     4,546     1,173     711     1,694     3,851     9,268     9,733     33,490     67,204
Cash collateral on securities borrowed       2,891     -     -     -     -     -     -     -     -     2,891
Securities purchased under resale agreements       14,504     7,411     1,733     424     362     -     -     -     -     24,434
Loans                                                              
  Residential mortgages       46     85     91     1,256     2,286     17,287     86,825     44,693     -     152,569
  Personal       1,533     549     835     908     1,201     93     184     669     28,774     34,746
  Credit card       231     462     693     693     693     2,771     6,002     -     -     11,545
  Business and government       5,629     2,156     2,636     2,343     1,825     5,818     16,396     15,443     -     52,246
  Allowance for credit losses       -     -     -     -     -     -     -     -     (1,726)     (1,726)
Derivative instruments       881     930     543     1,206     495     2,702     4,834     7,755     -     19,346
Customers' liability under acceptances       7,854     1,443     -     -     3     -     -     -     -     9,300
Other assets       -     -     -     -     -     -     -     -     13,859     13,859
        $ 46,943   $ 17,582   $ 7,709   $ 7,588   $ 8,559   $ 32,522   $ 123,509   $ 78,293   $ 74,397   $ 397,102
October 31, 2013     $ 43,037   $ 16,420   $ 10,578   $ 14,461   $ 11,500   $ 44,524   $ 140,137   $ 44,355   $ 72,994   $ 398,006
Liabilities                                                              
Deposits (1)     $ 18,701   $ 14,153   $ 17,503   $ 15,938   $ 17,854   $ 26,768   $ 35,405   $ 25,955   $ 141,746   $ 314,023
Obligations related to securities sold short       12,263     -     -     -     -     -     -     -     -     12,263
Cash collateral on securities lent       1,236     -     -     -     -     -     -     -     -     1,236
Obligations related to securities sold                                                              
  under repurchase agreements       7,973     438     -     -     -     -     -     -     -     8,411
Derivative instruments       647     974     514     657     676     2,561     5,276     7,441     -     18,746
Acceptances       7,854     1,443     -     -     3     -     -     -     -     9,300
Other liabilities       -     -     -     -     -     -     -     -     10,653     10,653
Subordinated indebtedness       -     -     260     -     -     -     34     3,932     -     4,226
      $ 48,674   $ 17,008   $ 18,277   $ 16,595   $ 18,533   $ 29,329   $ 40,715   $ 37,328   $ 152,399   $ 378,858
October 31, 2013     $ 50,494   $ 15,659   $ 19,347   $ 13,414   $ 18,836   $ 31,600   $ 55,290   $ 28,371   $ 147,001   $ 380,012
(1) Comprises $128.1 billion (October 31, 2013: $125.0 billion) of personal deposits of which $123.1 billion (October 31, 2013: $120.4 billion) are in Canada and $5.0 billion
(October 31, 2013: $4.6 billion) in other countries; $178.7 billion (October 31, 2013: $182.9 billion) of business and government deposits of which $143.2 billion
(October 31, 2013: $149.0 billion) are in Canada and $35.5 billion (October 31, 2013: $33.9 billion) in other countries; and $7.2 billion (October 31, 2013: $5.6 billion)
of bank deposits of which $3.0 billion (October 31, 2013: $2.0 billion) are in Canada and $4.2 billion (October 31, 2013: $3.6 billion) in other countries.

Our net asset position remained unchanged relative to October 31, 2013. The changes in the contractual maturity profile were primarily due to the natural migration of maturities and also reflect the impact of our regular business activities.

Credit-related commitments
The following table provides the contractual maturity of notional amounts of credit-related commitments. Since a significant portion of commitments are expected to expire without being drawn upon, the total of the contractual amounts is not representative of future liquidity requirements.

                                                            No      
          Less than   1 - 3   3 - 6   6 - 9   9 - 12   1 - 2   2 - 5   Over     specified      
$ millions, as at April 30, 2014         1 month     months     months     months     months     years     years     5 years     maturity (1)   Total
Securities lending(2)       $ 26,150   $ -   $ -   $ -   $ -   $ -   $ -   $ -   $ -   $ 26,150
Unutilized credit commitments         671     4,628     1,189     1,031     1,721     6,301     26,283     1,506     111,712     155,042
Backstop liquidity facilities         -     -     124     3,558     -     -     -     -     -     3,682
Standby and performance                                                                
  letters of credit         682     1,463     1,144     2,602     1,505     389     952     336     -     9,073
Documentary and commercial                                                                
  letters of credit         49     191     11     5     -     -     23     -     -     279
Underwriting commitments         405     110     -     -     -     -     -     -     -     515
Other         260     -     -     -     -     -     -     -     -     260
          $ 28,217   $ 6,392   $ 2,468   $ 7,196   $ 3,226   $ 6,690   $ 27,258   $ 1,842   $ 111,712   $ 195,001
October 31, 2013       $ 26,147   $ 9,615   $ 3,343   $ 3,035   $ 2,528   $ 5,435   $ 25,942   $ 2,051   $ 116,487   $ 194,583
(1) Includes $89.5 billion (October 31, 2013: $94.7 billion) of personal, home equity and credit card lines which are unconditionally cancellable at our discretion. 
(2) Excludes securities lending of $1.2 billion (October 31, 2013: $2.1 billion) for cash because it is reported on the interim consolidated balance sheet.

Other contractual obligations
The following table provides the contractual maturities of other contractual obligations affecting our funding needs:

          Less than     1 - 3     3 - 6     6 - 9     9 - 12     1 - 2     2 - 5     Over      
$ millions, as at April 30, 2014           1 month     months     months     months     months     years     years     5 years     Total
Operating leases         $ 34   $ 67   $ 101   $ 100   $ 100   $ 381   $ 944   $ 1,234   $ 2,961
Purchase obligations (1)           44     113     160     182     132     503     1,058     459     2,651
Pension contributions (2)           5     10     15     -     -     -     -     -     30
          $ 83   $ 190   $ 276   $ 282   $ 232   $ 884   $ 2,002   $ 1,693   $ 5,642
October 31, 2013         $ 68   $ 221   $ 341   $ 357   $ 274   $ 809   $ 1,716   $ 1,599   $ 5,385
(1) Obligations that are legally binding agreements whereby we agree to purchase products or services with specific minimum or
baseline quantities defined at fixed, minimum or variable prices over a specified period of time are defined as purchase obligations.
Purchase obligations are included through to the termination date specified in the respective agreements, even if the contract is
renewable. Many of the purchase agreements for goods and services include clauses that would allow us to cancel the agreement
prior to expiration of the contract within a specific notice period. However, the amount above includes our obligations without regard
to such termination clauses (unless actual notice of our intention to terminate the agreement has been communicated to the
counterparty). The table excludes purchases of debt and equity instruments that settle within standard market timeframes.
(2) Includes estimated minimum pension contributions, and expected benefit payments for post-retirement medical and dental plans,
the long-term disability plan, and related medical and dental benefits for disabled employees. Subject to change as contribution
decisions are affected by various factors, such as market performance, regulatory requirements, and management's ability to
change funding policy. Also, funding requirements after 2014 are excluded due to the significant variability in the assumptions
required to project the timing of cash flows.

Other risks
We also have policies and processes to measure, monitor and control other risks, including strategic, insurance, operational, technology, reputation and legal, regulatory, and environmental risks. These risks and related policies and processes have not changed significantly from those described on pages 70 to 72 of the 2013 Annual Report.

Accounting and control matters

Critical accounting policies and estimates
A summary of significant accounting policies is presented in Note 1 to the consolidated financial statements of the 2013 Annual Report. The interim consolidated financial statements have been prepared using the same accounting policies as CIBC's consolidated financial statements for the year ended October 31, 2013, except as described in Note 1 to the interim consolidated financial statements. Certain accounting policies require us to make judgments and estimates, some of which may relate to matters that are uncertain. The key management judgments and estimates remain substantially unchanged from those described on pages 73 to 77 of the 2013 Annual Report, except for asset impairment, as well as the valuation of financial instruments, securitizations and structured entities and post-employment and other long-term benefit plan assumptions, which have been impacted by the adoption of new and amended accounting standards as described below.

Valuation of financial instruments
Debt and equity trading securities, trading business and government loans, obligations related to securities sold short, derivative contracts, AFS securities and FVO financial instruments are carried at fair value. FVO financial instruments include certain debt securities, structured deposits and business and government deposits. Retail mortgage interest rate commitments are also designated as FVO financial instruments.

Effective November 1, 2013, CIBC adopted IFRS 13 "Fair Value Measurement". Adoption of this standard did not result in changes to how we measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability at the measurement date in an orderly arm's length transaction between market participants in the principal market at the measurement date under current market conditions (i.e. the exit price). Fair value measurements are categorized into levels within a fair value hierarchy based on the nature of the valuation inputs (Level 1, 2 or 3). We have an established and well-documented process for determining fair value. Fair value is based on unadjusted quoted prices in an active market for the same instrument, where available (Level 1). If active market prices or quotes are not available for an instrument, fair value is then based on valuation models using only significant inputs that are observable (Level 2) or one of more significant non-observable inputs (Level 3). Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available. For instruments valued using internally developed models that use significant non-observable market inputs and are therefore classified within Level 3 of the hierarchy, the judgment used to estimate fair value is more significant than when estimating the fair value of instruments classified within Levels 1 and 2. To ensure that valuations are appropriate, a number of policies and controls are put in place. Independent validation of fair value is performed at least on a monthly basis. Valuation inputs are verified to external sources such as exchange quotes, broker quotes or other management-approved independent pricing sources.

The following table presents amounts, in each category of financial instruments, which are fair valued using valuation techniques based on one or more significant non-observable market inputs (Level 3), for the structured credit run-off business and total consolidated CIBC. For further details of the valuation of and sensitivity associated with Level 3 financial assets and liabilities, see Note 2 to the interim consolidated financial statements.

                              2014                       2013  
$ millions, as at                           Apr. 30                       Oct. 31  
              Structured credit         Total   Total       Structured credit         Total   Total    
            run-off business         CIBC   CIBC (1)     run-off business         CIBC   CIBC (1)
Financial assets                                                        
Trading securities and loans           $ 827   $     827   1.7 %   $ 837   $     837   1.8 %
AFS securities             20         826   3.8       13         913   3.3    
FVO securities             136         136   47.4         147         147   51.2    
Derivative instruments             242         291   1.5       295         341   1.7    
              $ 1,225   $     2,080   2.3 %   $ 1,292   $     2,238   2.4 %
Financial liabilities                                                        
Deposits and other liabilities (2)           $ 536   $     834   31.2 %   $ 510   $     737   29.9 %
Derivative instruments             350         419   2.2         413         474   2.4    
              $ 886   $     1,253   3.7 %   $ 923   $     1,211   3.4 %
(1) Represents percentage of Level 3 assets and liabilities in each reported category that are carried at fair value on the interim
consolidated financial statements.
(2) Includes FVO deposits and bifurcated embedded derivatives.

Fair value adjustments

We apply judgment in establishing valuation adjustments that take into account various factors that may have an impact on the valuation of financial instruments that are carried at fair value on the consolidated balance sheet. Such factors include, but are not limited to, the bid-offer spread, illiquidity due to lack of market depth and other market risks, parameter uncertainty, model risk, credit risk, and future administration costs.

The establishment of fair value adjustments and the determination of the amount of write-downs involve estimates that are based on accounting processes and judgments by management. We evaluate the adequacy of the fair value adjustments and the amount of write-downs on an ongoing basis. The levels of fair value adjustments and the amount of the write-downs could change as events warrant and may not reflect ultimate realizable amounts.

The following table summarizes our valuation adjustments:

                        2014           2013
$ millions, as at                       Apr. 30           Oct. 31
Securities                                    
Market risk                     $ 2       $   5
Derivatives                                    
Market risk                       53           57
Credit risk                       9           42
Administration costs                       5           5
Total valuation adjustments                     $ 69       $   109

Allowance for credit losses
We establish and maintain an allowance for credit losses that is considered the best estimate of probable credit-related losses existing in our portfolio of on- and off-balance sheet financial instruments, giving due regard to current conditions.

The allowance for credit losses consists of individual and collective components.

Individual allowances
The majority of our business and government loan portfolios are assessed on an individual loan basis. Individual allowances are established when impaired loans are identified within the individually assessed portfolios. A loan is classified as impaired when we are of the opinion that there is no longer a reasonable assurance of the full and timely collection of principal and interest. The individual allowance is the amount required to reduce the carrying value of an impaired loan to its estimated realizable amount. This is determined by discounting the expected future cash flows at the effective interest rate inherent in the loan.

Individual allowances are not established for portfolios that are collectively assessed, including most retail portfolios.

Collective allowances

Consumer and certain small business allowances
Residential mortgages, credit card loans, personal loans, and certain small business loan portfolios consist of large numbers of homogeneous balances of relatively small amounts, for which we take a portfolio approach to establish the collective allowance. As it is not practical to review each individual loan, we utilize a formula basis, by reference to historical ratios of write-offs to current accounts and balances in arrears. For residential mortgages, personal loans and certain small business loans, this historical loss experience enables CIBC to determine appropriate probability of default (PD) and loss given default (LGD) parameters, which are used in the calculation of the portion of the collective allowance for current accounts. The PDs determined by this process that correspond to the risk levels in our retail portfolios are disclosed on page 48 of the 2013 Annual Report. For credit card loans, non-current residential mortgages, personal loans and certain small business loans, the historical loss experience enables CIBC to calculate flows to write-off in our roll-rate models that determine the collective allowance that pertain to these loans.

We also consider estimates of the time periods over which losses that are present would be identified and a provision taken, our view of current economic and portfolio trends, evidence of credit quality improvements or deterioration, and events such as the 2013 Alberta floods. On a regular basis, the parameters that affect the allowance calculation are updated, based on our experience and the economic environment.

Business and government allowances
For groups of individually assessed loans for which no objective evidence of impairment has been identified on an individual basis, a collective allowance is provided for losses which we estimate are inherent in the portfolio at the reporting date, but not yet specifically identified from an individual assessment of the loan.

The methodology for determining the appropriate level of the collective allowance incorporates a number of factors, including the size of the portfolios, expected loss rates, and relative risk profiles. We also consider estimates of the time periods over which losses that are present would be identified and a provision taken, our view of current economic and portfolio trends, and evidence of credit quality improvements or deterioration. On a regular basis, the parameters that affect the collective allowance calculation are updated, based on our experience and the economic environment. Expected loss rates for business loan portfolios are based on the risk rating of each credit facility and on the PD factors associated with each risk rating, as well as estimates of LGD. The PD factors reflect our historical loss experience and are supplemented by data derived from defaults in the public debt markets. Our risk-rating method and categories are disclosed on page 47 of the 2013 Annual Report. Historical loss experience is adjusted based on observable data to reflect the effects of current conditions. LGD estimates are based on our experience over past years.

For further details on the allowance for credit losses, see Note 5 to the interim consolidated financial statements.

Securitizations and structured entities

Securitization of our own assets
Effective November 1, 2013, with retrospective application to November 1, 2012, CIBC adopted IFRS 10 "Consolidated Financial Statements" which replaced IAS 27 "Consolidated and Separate Financial Statements" and SIC 12 "Consolidation - Special Purpose Entities". Under IFRS 10, judgment is exercised in determining whether an investor controls an investee including assessing whether the investor has: (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to affect those returns through its power over the investee.

We sponsor several structured entities that purchase and securitize our own assets including the Cards II Trust, Broadway Trust and Crisp Trust, which we continue to consolidate under IFRS 10.

We also securitize our own mortgage assets through a government-sponsored securitization program. We sell these securitized assets to a government-sponsored securitization vehicle that we do not consolidate, as well as to other third parties. IAS 39 "Financial Instruments - Recognition and Measurement" provides guidance on when to derecognize financial assets. A financial asset is derecognized when the contractual rights to receive cash flows from the asset have expired, or when we have transferred the rights to receive cash flows from the asset such that:

  • We have transferred substantially all the risks and rewards of the asset; or
  • We have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.

We have determined that our securitization activities related to residential mortgages and cards receivables are accounted for as secured borrowing transactions because we have not met the aforementioned criteria.

In addition, we sell and derecognize commercial mortgages through a pass-through arrangement with a trust that securitizes these mortgages into ownership certificates held by various external investors. We continue to perform special servicing of the mortgages in exchange for a market-based fee and do not consolidate the trust. We also sell certain U.S. commercial mortgages to third-parties which qualify for derecognition because we have transferred substantially all the risks and rewards of the mortgages and have no continuous involvement after the transfer.

Securitization of third-party assets
We also sponsor several structured entities that purchase pools of third-party assets. We consider a number of factors in determining whether CIBC controls these structured entities. We monitor the extent to which we support these structured entities, through direct investment in the debt issued by the structured entities and through the provision of liquidity protection to the other debtholders, to assess whether we should consolidate these entities.

Where we consider that CIBC should consolidate a structured entity, IFRS 10 requires that we reconsider this assessment if facts and circumstances indicate that there are changes to one or more of the three elements of control described above, for example, when any of the parties gains or loses power to direct relevant activities of the investee, or when there is a change in the parties' exposure or rights to variable returns from its involvement with the investee.

Specifically, in relation to our multi-seller conduits, we reconsider our consolidation assessment whenever our level of interest in the ABCP issued by the conduits changes significantly, or in the rare event that the liquidity facility we provide to the conduits is drawn or amended.

A significant increase in our holdings of the outstanding commercial paper by the conduits would become more likely in a scenario in which the market for bank-sponsored ABCP suffered a significant deterioration such that the conduits were unable to roll their ABCP.

For additional information on the securitizations of our own assets and third-party assets, see the "Off-balance sheet arrangements" section and Note 7 to the interim consolidated financial statements.

Asset impairment

Goodwill, other intangible assets and long-lived assets
As at April 30, 2014, we had goodwill of $1,438 million (October 31, 2013: $1,733 million) and other intangible assets with an indefinite life of $138 million (October 31, 2013: $136 million). Goodwill is not amortized, but is tested, at least annually, for impairment by comparing the recoverable amount of the cash-generating unit (CGU) to which goodwill has been allocated, with the carrying amount of the CGU including goodwill. Any deficiency is recognized as impairment of goodwill. The recoverable amount of a CGU is defined as the higher of its estimated fair value less cost to sell or value in use. Goodwill is also required to be tested for impairment whenever there are indicators that it may be impaired.

Acquired intangible assets are separately recognized if the benefits of the intangible assets are obtained through contractual or other legal rights, or if the intangible assets can be sold, transferred, licensed, rented, or exchanged. Determining the useful lives of intangible assets requires judgment and fact-based analysis. Intangibles with an indefinite life are not amortized but are assessed for impairment by comparing the recoverable amount to the carrying amount.

Long-lived assets and other identifiable intangibles with a definite life are amortized over their estimated useful lives. These assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount is higher than the recoverable amount. The recoverable amount is defined as the higher of its estimated fair value less cost to sell and value in use. In calculating the recoverable amount we estimate the future cash flows expected to result from the use of the asset and its eventual disposition.

We performed our annual impairment testing of goodwill and indefinite life intangible assets in the fourth quarter of 2013 and did not record any impairment at that time. During the second quarter of 2014, we identified indicators that goodwill relating to the CIBC FirstCaribbean CGU may be impaired.  We performed an impairment test and determined that the carrying amount of the CIBC FirstCaribbean CGU exceeded its recoverable amount.  As a result, we recognized a goodwill impairment charge of $420 million during the three months ended April 30, 2014, which reduced the carrying amount of the goodwill relating to CIBC FirstCaribbean to $344 million as at April 30, 2014.

The recoverable amount of our CIBC FirstCaribbean CGU is based on a value in use calculation that was estimated using a five year cash flow projection and an estimate of the capital required to be maintained in the region to support ongoing operations. The five year cash flow projection is consistent with CIBC FirstCaribbean's three year internal plan that was previously reviewed by its Board of Directors, adjusted in the current quarter to reflect management's belief that the economic recovery expected in the Caribbean region will occur over a longer period of time than originally forecasted and that estimated realizable values of underlying collateral for non-performing loans will be lower than previously expected.  A terminal growth rate of 2.5% (2.5% as at August 1, 2013) was applied to the years after the five year forecast. All of the forecast cash flows were discounted at an after-tax rate of 13% (13.62% pre-tax) which we believe to be a risk-adjusted interest rate appropriate to CIBC FirstCaribbean (we used an identical after-tax rate of 13% as at August 1, 2013). The determination of a discount rate and a terminal growth rate require the exercise of judgment. The discount rate was determined based on the following primary factors: i) the risk-free rate, ii) an equity risk premium, iii) beta adjustment to the equity risk premium based on a review of betas of comparable publicly traded financial institutions in the region, and iv) a country risk premium. The terminal growth rate was based on the forecast inflation rates and management's expectations of real growth.

Estimation of the recoverable amount is an area of significant judgment. Reductions in the estimated recoverable amount could arise from various factors, such as, reductions in forecasted cash flows, an increase in the assumed level of required capital, and any adverse changes to the discount rate or the terminal growth rate either in isolation or in any combination thereof. We have estimated that a 10% decrease in each of the terminal year's and subsequent years' forecasted cash flows would result in a reduction in the estimated recoverable amount of the CIBC FirstCaribbean CGU by approximately $115 million. We have also estimated that a 50 basis point increase in the after-tax discount rate would result in a reduction in the estimated recoverable amount of the CIBC FirstCaribbean CGU by approximately $65 million. These sensitivities are indicative only and should be considered with caution, as the effect of the variation in each assumption on the estimated recoverable amount is calculated in isolation without changing any other assumptions. In practice, changes in one factor may result in changes in another, which may magnify or counteract the disclosed sensitivities. For additional details, see Note 6 to our interim consolidated financial statements.

Economic conditions in the Caribbean region remain challenging and we continue to monitor our investment. Reductions in the estimated recoverable amount of our CIBC FirstCaribbean CGU could result in additional goodwill impairment charges in future periods.

Income taxes
We are subject to income tax laws in the various jurisdictions where we operate, and the tax laws in those jurisdictions are potentially subject to different interpretations by us and the relevant taxation authority. We use judgment in the estimation of income taxes and deferred income tax assets and liabilities. As a result, management judgment is applied in the interpretation of the relevant tax laws and in estimating the provision for current and deferred income taxes. A deferred tax asset or liability is determined for each temporary difference based on the tax rates that are expected to be in effect in the period that the asset is realized or the liability is settled. Where the temporary differences will not reverse in the foreseeable future, no deferred tax amount is recognized.

As at April 30, 2014, we had a deferred tax asset of $536 million (October 31, 2013: $526 million) and a deferred tax liability of $30 million (October 31, 2013: $33 million). We are required to assess whether it is probable that our deferred income tax asset will be realized prior to its expiration and, based on all the available evidence, determine if any portion of our deferred income tax asset should not be recognized. The factors used to assess the probability of realization are our past experience of income and capital gains, forecast of future net income before taxes, available tax planning strategies that could be implemented to realize the deferred income tax asset, and the remaining expiration period of tax loss carryforwards.  Although realization is not assured, we believe, based on all the available evidence, it is probable that the remaining deferred income tax asset will be realized.

Income tax accounting impacts all our reporting segments. For further details of our income taxes, see Note 11 to the interim consolidated financial statements.

Contingent liabilities and provision
In the ordinary course of its business, CIBC is a party to a number of legal proceedings, including regulatory investigations, in which claims for substantial monetary damages are asserted against CIBC and its subsidiaries. Legal provisions are established if, in the opinion of management, it is both probable that an outflow of economic benefits will be required to resolve the matter, and a reliable estimate can be made of the amount of the obligation. If the reliable estimate of probable loss involves a range of potential outcomes within which a specific amount within the range appears to be a better estimate, that amount is accrued. If no specific amount within the range of potential outcomes appears to be a better estimate than any other amount, the mid-point in the range is accrued. In some instances, however, it is not possible either to determine whether an obligation is probable or to reliably estimate the amount of loss, in which case no accrual can be made.

While there is inherent difficulty in predicting the outcome of legal proceedings, based on current knowledge and in consultation with legal counsel, we do not expect the outcome of these matters, individually or in aggregate, to have a material adverse effect on our consolidated financial statements. However, the outcome of these matters, individually or in aggregate, may be material to our operating results for a particular reporting period. We regularly assess the adequacy of CIBC's litigation accruals and make the necessary adjustments to incorporate new information as it becomes available.

The provisions disclosed in Note 23 to the 2013 annual consolidated financial statements included all of CIBC's accruals for legal matters as at that date, including amounts related to the significant legal proceedings described in that note and to other legal matters.

CIBC considers losses to be reasonably possible when they are neither probable nor remote. It is reasonably possible that CIBC may incur losses in addition to the amounts recorded when the loss accrued is the mid-point of a range of reasonably possible losses, or the potential loss pertains to a matter in which an unfavourable outcome is reasonably possible but not probable.

CIBC believes the estimate of the aggregate range of reasonably possible losses, in excess of the amounts accrued, for its significant legal proceedings, where it is possible to make such an estimate, is from nil to approximately $240 million as at April 30, 2014. This estimated aggregate range of reasonably possible losses is based upon currently available information for those significant proceedings in which CIBC is involved, taking into account CIBC's best estimate of such losses for those cases for which an estimate can be made. CIBC's estimate involves significant judgment, given the varying stages of the proceedings and the existence of multiple defendants in many of such proceedings whose share of the liability has yet to be determined. The range does not include potential punitive damages and interest. The matters underlying the estimated range as at April 30, 2014 consist of the significant legal matters disclosed in Note 23 to the 2013 annual consolidated financial statements as updated below. The matters underlying the estimated range will change from time to time, and actual losses may vary significantly from the current estimate.  For certain matters, CIBC does not believe that an estimate can currently be made as many of them are in preliminary stages and certain matters have no specific amount claimed. Consequently, these matters are not included in the range.

The following developments related to our significant legal matters occurred since the issuance of our 2013 annual consolidated financial statements:

  • Marcotte Visa Class Action: The appeal was heard by the Supreme Court of Canada in February 2014. The court reserved its decision.
  • Green Secondary Market Class Action: In February 2014 the Ontario Court of Appeal released its decision overturning the lower court and allowing the matter to proceed as a certified class action. CIBC and the individual defendants have sought leave to appeal to the Supreme Court of Canada.
  • Brown Overtime Class Action: The plaintiffs' appeal to the Ontario Court of Appeal was heard in May 2014. The court reserved its decision.
  • Watson Credit Card Class Action: On March 27, 2014 the court released its decision granting class certification. The plaintiffs and defendants have filed Notices of Appeal.

Other than the items described above, there are no significant developments in the matters identified in Note 23 to our 2013 annual consolidated financial statements, and no significant new matters have arisen since the issuance of our 2013 annual consolidated financial statements.

Post-employment and other long-term benefit plan assumptions
We sponsor a number of benefit plans to eligible employees, including registered and supplemental pension plans, and post-retirement medical and dental plans (other post-employment benefit plans). We also continue to sponsor a long-term disability income replacement plan and associated medical and dental benefits (collectively, other long-term benefit plans). The long-term disability plan was closed to new claims effective June 1, 2004.

Effective November 1, 2013, with retrospective application to November 1, 2011, CIBC adopted amendments to IAS 19 "Employee Benefits". The amendments require the following: (i) recognition of actuarial gains and losses in OCI in the period in which they arise; (ii) recognition of interest income on plan assets in net income using the same rate as that used to discount the defined benefit obligation; and (iii) recognition of all past service costs (gains) in net income in the period in which they arise. See Note 1 to the interim consolidated financial statements for further details on the impact of the adoption of the amendments to IAS 19 on prior periods.

The calculation of net defined benefit plan expense and obligations depends on various actuarial assumptions such as discount rates, health-care cost trend rates, turnover of employees, projected salary increases, retirement age, and mortality rates. The actuarial assumptions used for determining the net defined benefit expense for a fiscal year are set at the beginning of the annual reporting period, are reviewed in accordance with accepted actuarial practice and are approved by management.

The discount rate assumption used in measuring the net defined benefit expense and defined benefit obligations reflects market yields, as of the measurement date, on high quality debt instruments with a currency and term to maturity that match the currency and expected timing of benefit payments. Our discount rate is estimated by developing a yield curve based on high quality corporate bonds. While there is a deep market of high quality corporate bonds denominated in Canadian dollars with short and medium terms to maturity, there is not a deep market in bonds with terms to maturity that match the timing of all the expected benefit payments for all of our Canadian plans. As a result, for our Canadian pension, other post-employment and other long-term benefit plans, we estimate the yields of high quality corporate bonds with longer term maturities by extrapolating current yields on bonds with short- and medium-term durations along the yield curve. Judgment is required in constructing the yield curve, and as a result, different methodologies applied in constructing the yield curve can give rise to different discount rates.

As a result of adopting the amendments to IAS 19, commencing in the first quarter of 2014, with retrospective application for fiscal 2013 and 2012, we remeasure our Canadian post-employment benefit plans on a quarterly basis for changes in the discount rate and for actual assets returns, with the actuarial gains and losses recognized in OCI (see Note 1 to the interim consolidated financial statements for further details).

For further details of our annual pension and other post-employment expense and obligations, see Note 19 to the 2013 annual consolidated financial statements and Note 1 to the interim consolidated financial statements.

Regulatory developments

Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") was enacted in the U.S. in July 2010. The Dodd-Frank Act contains many broad reforms impacting the financial services industry, including, among other things, increased consumer protection, regulation of the OTC derivative markets, heightened capital, liquidity and prudential standards, and restrictions on proprietary trading by banks. The Dodd-Frank Act will affect every financial institution in the U.S. and many financial institutions that operate outside the U.S. As many aspects of the Dodd-Frank Act are subject to rulemaking that U.S. regulators have not finalized, the full impact on CIBC is difficult to anticipate until all the regulations are finalized and released. CIBC continually monitors developments to prepare for rulemakings that have the potential to impact our operations in the U.S. and elsewhere.

In December 2012, CIBC registered as a swap dealer with the U.S. Commodity Futures Trading Commission (CFTC) and adopted processes and procedures necessary to comply with newly-promulgated U.S. regulations in trading swaps with U.S. persons. The CFTC has issued final rules on most areas relating to swaps, including cross-border guidance that impacts CIBC's swap trading with non-U.S. counterparties. The CFTC has not yet issued final rules on clearing, capital and margin, and the CFTC has not issued a determination of the extent to which it will rely on substituted compliance with Canadian swap trading regulations. CIBC will continue to monitor and prepare for developments by the CFTC in this area. Additionally, the SEC is expected to implement parallel reforms applying to the securities-based swaps markets. While these far-reaching reforms have increased our cost of regulatory compliance and may restrict our ability to continue to engage in certain types of trading activity, we do not expect them to have a significant impact on our results.

On February 18, 2014, the Federal Reserve Board released final enhanced prudential standards for large U.S. bank holding companies and foreign banking organizations (FBOs) with total consolidated assets of $50 billion or more. The new enhanced prudential standards include six primary requirements: risk-based capital and leverage requirements; liquidity requirements; single counterparty exposure limits; internal risk management standards; debt-to-equity limits; and annual stress testing. The new rules also require FBOs to maintain liquidity buffers in their U.S. branches and agencies and, if certain asset thresholds are met, to create a U.S. intermediate holding company which will also be subject to enhanced prudential standards. CIBC believes the new rules will not have a material impact on our operations.

The Dodd-Frank Act also mandates the so-called Volcker Rule, which restricts certain proprietary trading and private equity fund activities of banking entities operating in the U.S.  In December 2013, five U.S. regulatory agencies jointly published final regulations implementing the Volcker rule.  The final regulations and the accompanying materials are complex and will require CIBC to implement new controls and to develop new systems to ensure compliance with the rule's reporting obligations and restrictions.  Banking entities must engage in good-faith efforts that will result in conformance with the rule by July 21, 2015.  CIBC is actively assessing the impact of the Volcker rule on our operations and developing a conformance plan for full implementation. The new regulations also contain various provisions that enable banks to seek extensions in certain circumstances and CIBC may seek such extensions where necessary or appropriate.

The Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA) is U.S. legislation, the intent of which is to discourage tax evasion by U.S. taxpayers who have placed assets in financial accounts outside of the U.S. - either directly or indirectly through foreign entities such as trusts and corporations.

Under the final FATCA regulations, non-U.S. financial institutions will be required to identify and report accounts owned or controlled by U.S. taxpayers, including citizens of the U.S. worldwide (U.S. Accounts). In addition, identification and reporting will also be required on accounts of financial institutions that do not comply with FATCA regulations. On February 5, 2014, the Government of Canada announced the signing of an Intergovernmental Agreement (IGA) with the U.S., to facilitate FATCA information reporting by Canadian financial institutions. Under proposed legislation to implement the provisions of the IGA, Canadian financial institutions must report information on certain U.S. Accounts directly to the Canada Revenue Agency. Other countries in which CIBC operates have signed, or are in the process of negotiating and signing, IGAs with the U.S. CIBC will meet all FATCA obligations, in accordance with local law.

The provisions of FATCA and the related Canadian legislation come into effect on July 1, 2014.

Principles for Effective Risk Data Aggregation and Risk Reporting

In January 2013, the BCBS published "Principles for Effective Risk Data Aggregation and Risk Reporting". The Principles outline BCBS's expectations to enhance risk data governance oversight and to improve risk data aggregation and reporting practices, thereby facilitating timely, consistent, and accurate decision making. It is expected that we will be subject to greater reporting scrutiny and may incur increased operating costs as a result of the Principles. We have begun an enterprise-wide Risk Data Aggregation initiative to be compliant with the Principles.

Global systemically important banks public disclosure requirements
The BCBS paper "Global systemically important banks: updated assessment methodology and the higher loss absorbency requirement" dated July 3, 2013 describes the annual assessment methodology and the 12 indicators used to identify global systemically important banks (G-SIBs). The document also provides annual public disclosure requirements applicable to large globally-active banks.

In March 2014, OSFI published an Advisory on the implementation of the G-SIB public disclosure requirements in Canada. Federally-regulated banks which have not been identified as G-SIBs, and which have Basel III leverage ratio exposure measures greater than the equivalent of €200 billion at year-end, are required to publicly disclose the 12 indicators (in Canadian equivalent values) annually. Such banks must publicly disclose both year-end 2014 and comparative 2013 data by the time the first quarterly financial report of 2015 is released.

Controls and procedures

Disclosure controls and procedures
CIBC's management, with the participation of the President and Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of CIBC's disclosure controls and procedures as at April 30, 2014 (as defined in the rules of the SEC and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures were effective.

Changes in internal control over financial reporting
There have been no changes in CIBC's internal control over financial reporting during the quarter and six months ended April 30, 2014, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Interim consolidated financial statements
(Unaudited)


Consolidated balance sheet                          
                           
              2014         2013 (1)
Unaudited, $ millions, as at             Apr. 30         Oct. 31  
ASSETS                          
Cash and non-interest-bearing deposits with banks           $ 2,873     $   2,211  
Interest-bearing deposits with banks             7,815         4,168  
Securities                          
Trading             45,148         44,070  
Available-for-sale (AFS) (Note 4)             21,769         27,627  
Designated at fair value (FVO)             287         287  
              67,204         71,984  
Cash collateral on securities borrowed             2,891         3,417  
Securities purchased under resale agreements             24,434         25,311  
Loans                          
Residential mortgages             152,569         150,938  
Personal             34,746         34,441  
Credit card             11,545         14,772  
Business and government             52,246         48,207  
Allowance for credit losses (Note 5)             (1,726)         (1,698)  
              249,380         246,660  
Other                          
Derivative instruments             19,346         19,947  
Customers' liability under acceptances             9,300         9,720  
Land, buildings and equipment             1,741         1,719  
Goodwill (Note 6)             1,438         1,733  
Software and other intangible assets             897         756  
Investments in equity-accounted associates and joint ventures             1,766         1,695  
Deferred tax asset             536         526  
Other assets             7,481         8,159  
              42,505         44,255  
            $ 397,102     $   398,006  
LIABILITIES AND EQUITY                          
Deposits (Note 8)                          
Personal           $ 128,128     $   125,034  
Business and government             136,073         134,736  
Bank             7,182         5,592  
Secured borrowings             42,640         49,802  
              314,023         315,164  
Obligations related to securities sold short             12,263         13,327  
Cash collateral on securities lent             1,236         2,099  
Obligations related to securities sold under repurchase agreements             8,411         4,887  
Other                          
Derivative instruments             18,746         19,724  
Acceptances             9,300         9,721  
Deferred tax liability             30         33  
Other liabilities             10,623         10,829  
              38,699         40,307  
Subordinated indebtedness             4,226         4,228  
Equity                          
Preferred shares             1,381         1,706  
Common shares (Note 9)             7,745         7,753  
Contributed surplus             82         82  
Retained earnings             8,820         8,318  
Accumulated other comprehensive income (AOCI)             60         (40)  
Total shareholders' equity             18,088         17,819  
Non-controlling interests             156         175  
Total equity             18,244         17,994  
            $ 397,102     $   398,006  
(1) Certain information has been reclassified to conform to the presentation adopted in the current period.

The accompanying notes and shaded sections in "MD&A - Management of risk" are an integral part of these interim consolidated financial statements.

                                             
Consolidated statement of income                                            
                                             
            For the three   For the six
            months ended   months ended
                2014       2014       2013     2014       2013
Unaudited, $ millions, except as noted             Apr. 30       Jan. 31       Apr. 30     Apr. 30       Apr. 30
Interest income                                            
Loans           $ 2,282     $ 2,423     $ 2,389   $ 4,705     $ 4,863
Securities             399       429       409     828       812
Securities borrowed or purchased under resale agreements             74       82       86     156       174
Deposits with banks             8       8       10     16       21
                2,763       2,942       2,894     5,705       5,870
Interest expense                                            
Deposits             801       873       903     1,674       1,841
Securities sold short             78       82       82     160       165
Securities lent or sold under repurchase agreements             28       28       27     56       57
Subordinated indebtedness             45       44       50     89       102
Other             13       10       10     23       28
                965       1,037       1,072     2,002       2,193
Net interest income             1,798       1,905       1,822     3,703       3,677
Non-interest income                                            
Underwriting and advisory fees             88       78       97     166       203
Deposit and payment fees             205       212       195     417       386
Credit fees             114       117       109     231       227
Card fees             87       113       127     200       265
Investment management and custodial fees             168       142       117     310       229
Mutual fund fees             300       282       249     582       489
Insurance fees, net of claims             95       97       86     192       171
Commissions on securities transactions             108       103       107     211       208
Trading income (loss)             (12)       1       1     (11)       15
AFS securities gains, net             76       57       83     133       155
FVO gains (losses), net             (21)       5       -     (16)       (3)
Foreign exchange other than trading             12       21       17     33       21
Income from equity-accounted associates and joint ventures             52       41       29     93       55
Other             97       460       85     557       191
                1,369       1,729       1,302     3,098       2,612
Total revenue             3,167       3,634       3,124     6,801       6,289
Provision for credit losses (Note 5)             330       218       265     548       530
Non-interest expenses                                            
Employee compensation and benefits             1,133       1,160       1,056     2,293       2,156
Occupancy costs             190       179       180     369       348
Computer, software and office equipment             294       283       251     577       498
Communications             79       75       80     154       157
Advertising and business development             72       65       51     137       98
Professional fees             52       45     <