CIBC Announces Third Quarter 2014 Results Français

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Aug 28, 2014, 05:55 ET

TORONTO, Aug. 28, 2014 /CNW/ - CIBC (TSX: CM) (NYSE: CM) today announced its financial results for the third quarter ended July 31, 2014.

Third quarter highlights

Reported net income was $921 million, compared with $878 million for the third quarter a year ago, and $306 million for the prior quarter.
Adjusted net income⁽¹⁾ was $908 million, compared with $931 million for the third quarter a year ago, and $887 million for the prior quarter.
Reported diluted earnings per share (EPS) was $2.26, compared with $2.13 for the third quarter a year ago, and $0.73 for the prior quarter.
Adjusted diluted EPS⁽¹⁾ was $2.23, compared with $2.26 for the third quarter a year ago, and $2.17 for the prior quarter.
Reported return on common shareholders' equity (ROE) was 21.0% and adjusted ROE⁽¹⁾ was 20.7%.

Results for the third quarter of 2014 were affected by the following items of note aggregating to a positive impact of $0.03 per share:

$52 million ($30 million after-tax, or $0.08 per share) gain within an equity-accounted investment in our merchant banking portfolio;
$9 million ($7 million after-tax, or $0.02 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);
$9 million ($8 million after-tax, or $0.02 per share) amortization of intangible assets; and
$2 million ($2 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 July 31, 2014 was 10.1%, and our Tier 1 and Total capital ratios were 12.2% and 14.8%, respectively, on an all-in basis compared with Basel III Common Equity Tier 1 ratio of 10.0%, Tier 1 capital ratio of 12.1% and Total capital ratio of 14.9% in the prior quarter.

CIBC announced today the intention to seek Toronto Stock Exchange approval for a normal course issuer bid that would permit us to purchase for cancellation up to a maximum of 8 million, or approximately 2% of our outstanding common shares, over the next 12 months.

"CIBC's solid results this quarter reflect the strength of our retail and wholesale banking franchises and strong wealth management platform," says Gerald T. McCaughey, CIBC President and Chief Executive Officer. "As we strive to be the leading bank for our clients, our clear focus on client service coupled with our strategic growth initiatives underpins our ability to deliver consistent and sustainable earnings."

Core business performance

Retail and Business Banking reported net income of $589 million for the third quarter, down $23 million or 4% from the third quarter a year ago. Adjusting for the items of note shown above, adjusted net income⁽¹⁾ was $597 million, down $31 million or 5% from the third quarter a year ago. Core operating results were strong including solid volume growth across key products and lower loan losses, which were offset by lower cards revenue due to the sale of the Aeroplan portfolio. Ongoing investment in innovations and strategic initiatives continue to support deeper client relationships.

During the third 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 launched the new CIBC Tim Hortons Double Double Visa Card in partnership with Tim Hortons, leveraging a first-of-its-kind two-button technology that combines a CIBC Visa credit card with a Tim Hortons rewards card;
More than one million cheques were deposited using our eDeposit™ feature available on our mobile banking app since it was launched, giving clients the flexibility to deposit cheques to their CIBC accounts by taking a picture of the cheque with their mobile device - a first among the major Canadian banks; and
We were awarded "Best Consumer Internet Bank - Canada" and "Best Integrated Consumer Bank Site - North America" by Global Finance Magazine.

Wealth Management reported net income of $121 million for the third quarter, up $19 million or 19% from the third quarter a year ago.

Revenue of $568 million was up $110 million or 24% compared with the third 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, and the acquisition of Atlantic Trust.

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

CIBC Asset Management achieved $100 billion in assets under management - a significant milestone along with its 22^nd consecutive quarter of positive net sales of long-term mutual funds which hit $4.5 billion year to date;
Client satisfaction, a key focus and a foundation of our growth strategy, continues to strengthen at CIBC Wood Gundy and is among the industry's leaders with an 11% increase over the past six years; and
Atlantic Trust was recently ranked the second-highest luxury brand among wealth management firms in the U.S. in the 2014 Luxury Brand Status Index™ (LBSI) wealth management survey.

Wholesale Banking reported net income of $282 million for the third quarter, up $69 million or 32% from the prior quarter. Excluding items of note, adjusted net income⁽¹⁾ was $254 million, up $26 million or 11% from the prior quarter.

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

Joint bookrunner in a new $3.5 billion revolving credit facility and joint lead agent and joint bookrunner for $1 billion of senior secured bonds for North West Redwater Partnership;
Joint bookrunner on PrairieSky Royalty's $1.7 billion initial public offering of common shares; and
Financial advisor to Merit Energy Company on the sale of its oil producing properties in Wyoming to Memorial Production Partners for $915 million and the sale of its properties in Colorado to Atlas Resource Partners for $420 million.

"In summary, CIBC delivered strong performance during the third quarter," says Mr. McCaughey. "We are on track in executing our growth strategy to be the leading bank for our clients and we are well positioned for future 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:

Helped raise $3.2 million in support of children with cancer and their families through our sponsorship of the Tour CIBC Charles Bruneau and the CIBC 401 Bike Challenge;
Committed $1 million to KidSport, a national program that helps give kids greater access to organized sport, to mark the one year countdown to the TORONTO 2015 Pan Am Games; and
As the Official Canadian Bank and CBC broadcast sponsor of the FIFA World Cup™, celebrated Canadians' passion for the beautiful game with a 12-stop cross country CIBC Soccer Nation tour.

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

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

(The board of directors of CIBC reviewed this news 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 third 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 third 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 nine months ended July 31, 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 August 27, 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 "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", and "Accounting and control matters - Regulatory developments" 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 U.S. Foreign Account Tax Compliance Act and regulatory reforms in the United Kingdom and Europe, 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; social media risk; 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 including through internet and mobile banking; 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 and the high U.S. fiscal deficit; 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.

Third quarter financial highlights

						As at or for the three						As at or for the nine
						months ended						months ended
		2014			2014			2013			2014			2013
Unaudited		Jul. 31			Apr. 30			Jul. 31			Jul. 31			Jul. 31
Financial results ($ millions)
Net interest income		$	1,875		$	1,798		$	1,883		$	5,578		$	5,560
Non-interest income			1,483			1,369			1,366			4,581			3,978
Total revenue			3,358			3,167			3,249			10,159			9,538
Provision for credit losses			195			330			320			743			850
Non-interest expenses			2,047			2,412			1,878			6,438			5,691
Income before taxes			1,116			425			1,051			2,978			2,997
Income taxes			195			119			173			574			472
Net income		$	921		$	306		$	878		$	2,404		$	2,525
Net income (loss) attributable to non-controlling interests		$	3		$	(11)		$	1		$	(5)		$	5
Preferred shareholders			19			25			25			69			75
Common shareholders			899			292			852			2,340			2,445
Net income attributable to equity shareholders		$	918		$	317		$	877		$	2,409		$	2,520
Financial measures
Reported efficiency ratio			61.0	%		76.2	%		57.8	%		63.4	%		59.7	%
Adjusted efficiency ratio ⁽¹⁾			59.5	%		59.6	%		56.0	%		58.6	%		56.4	%
Loan loss ratio			0.33	%		0.51	%		0.45	%		0.40	%		0.45	%
Reported return on common shareholders' equity			21.0	%		7.0	%		22.3	%		18.5	%		21.9	%
Adjusted return on common shareholders' equity⁽¹⁾			20.7	%		20.6	%		23.7	%		21.1	%		23.3	%
Net interest margin			1.81	%		1.81	%		1.86	%		1.82	%		1.84	%
Net interest margin on average interest-earning assets			2.05	%		2.07	%		2.12	%		2.07	%		2.13	%
Return on average assets			0.89	%		0.31	%		0.86	%		0.79	%		0.84	%
Return on average interest-earning assets			1.01	%		0.35	%		0.99	%		0.89	%		0.97	%
Total shareholder return			4.65	%		14.05	%		(2.04)	%		17.74	%		2.83	%
Reported effective tax rate			17.5	%		28.1	%		16.5	%		19.3	%		15.7	%
Adjusted effective tax rate⁽¹⁾			16.2	%		13.5	%		17.0	%		15.5	%		16.5	%
Common share information
Per share ($)	- basic earnings	$	2.26		$	0.73		$	2.13		$	5.88		$	6.09
	- reported diluted earnings		2.26			0.73			2.13			5.87			6.09
	- adjusted diluted earnings⁽¹⁾		2.23			2.17			2.26			6.70			6.46
	- dividends		1.00			0.98			0.96			2.94			2.84
	- book value		43.02			42.04			38.93			43.02			38.93
Share price ($)	- high		102.06			97.72			80.64			102.06			84.70
	- low		95.66			85.49			74.10			85.49			74.10
	- closing		101.21			97.72			77.93			101.21			77.93
Shares outstanding (thousands)	- weighted-average basic		397,179			397,758			399,952			397,826			401,237
	- weighted-average diluted		398,022			398,519			400,258			398,584			401,621
	- end of period		396,974			397,375			399,992			396,974			399,992
Market capitalization ($ millions)		$	40,178		$	38,832		$	31,171		$	40,178		$	31,171
Value measures
Dividend yield (based on closing share price)			3.9	%		4.1	%		4.9	%		3.9	%		4.9	%
Reported dividend payout ratio			44.2	%		133.5	%		45.1	%		50.0	%		46.6	%
Adjusted dividend payout ratio⁽¹⁾			44.8	%		45.2	%		42.5	%		43.8	%		43.9	%
Market value to book value ratio			2.35			2.32			2.00			2.35			2.00
On- and off-balance sheet information ($ millions)
Cash, deposits with banks and securities		$	80,653		$	77,892		$	76,452		$	80,653		$	76,452
Loans and acceptances, net of allowance			262,489			258,680			254,227			262,489			254,227
Total assets			405,422			397,102			397,153			405,422			397,153
Deposits			322,314			314,023			313,114			322,314			313,114
Common shareholders' equity			17,076			16,707			15,573			17,076			15,573
Average assets			411,036			406,285			402,608			409,144			402,976
Average interest-earning assets			363,422			356,492			351,761			360,631			349,642
Average common shareholders' equity			16,989			17,173			15,162			16,911			14,925
Assets under administration⁽²⁾			1,713,076			1,663,858			1,460,311			1,713,076			1,460,311
Balance sheet quality measures
All-in basis
Common Equity Tier 1 (CET1) capital risk-weighted assets
(RWA) ($ billions)		$	139.9		$	135.9		$	134.0		$	139.9		$	134.0
Tier 1 capital RWA			140.2			135.9			134.0			140.2			134.0
Total capital RWA			140.6			135.9			134.0			140.6			134.0
CET1 ratio			10.1	%		10.0	%		9.3	%		10.1	%		9.3	%
Tier 1 capital ratio			12.2	%		12.1	%		11.6	%		12.2	%		11.6	%
Total capital ratio			14.8	%		14.9	%		14.7	%		14.8	%		14.7	%
Other information
Full-time equivalent employees			45,161			43,907			43,516			45,161			43,516

(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 $921 million, compared with $878 million for the same quarter last year, and $306 million for the prior quarter. Reported net income for the nine months ended July 31, 2014 was $2,404 million, compared with $2,525 million for the same period in 2013.

Adjusted net income⁽¹⁾ for the quarter was $908 million, compared with $931 million for the same quarter last year, and $887 million for the prior quarter. Adjusted net income⁽¹⁾ for the nine months ended July 31, 2014 was $2,746 million, compared with $2,675 million for the same period in 2013.

Reported diluted earnings per share (EPS) for the quarter was $2.26, compared with $2.13 for the same quarter last year, and $0.73 for the prior quarter. Reported diluted EPS for the nine months ended July 31, 2014 was $5.87, compared with $6.09 for the same period in 2013.

Adjusted diluted EPS⁽¹⁾ for the quarter was $2.23, compared with $2.26 for the same quarter last year, and $2.17 for the prior quarter. Adjusted diluted EPS⁽¹⁾ for the nine months ended July 31, 2014 was $6.70, compared with $6.46 for the same period in 2013.

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

$52 million ($30 million after-tax) gain within an equity-accounted investment in our merchant banking portfolio (Wholesale Banking);
$9 million ($7 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. (Aimia) and TD (Retail and Business Banking);
$9 million ($8 million after-tax) amortization of intangible assets⁽²⁾ ($1 million after-tax in Retail and Business Banking, $3 million after-tax in Wealth Management, and $4 million after-tax in Corporate and Other); and
$2 million ($2 million after-tax) loss from the structured credit run-off business (Wholesale Banking).

The above items of note increased revenue by $49 million, non-interest expenses by $17 million and income tax expenses by $19 million. In aggregate, these items of note increased net income by $13 million.

Net interest income⁽³⁾
Net interest income was down $8 million from the same quarter last year, primarily due to lower card revenue as a result of the Aeroplan transactions with Aimia and TD in the first quarter of 2014 and lower treasury revenue, partially offset by volume growth across retail products and higher trading income.

Net interest income was up $77 million or 4% from the prior quarter, primarily due to additional days in the quarter and volume growth across retail products.

Net interest income for the nine months ended July 31, 2014 was up $18 million from the same period in 2013, primarily due to volume growth across most retail products and higher revenue from corporate banking. These factors were mostly offset by lower card revenue as a result of the Aeroplan transactions noted above, and lower treasury revenue.

Non-interest income⁽³⁾
Non-interest income was up $117 million or 9% from the same quarter last year, primarily due to higher investment management and custodial, mutual fund, and underwriting and advisory fees, partially offset by trading losses in the current quarter compared with trading income in the same quarter last year, and lower card fees as a result of the Aeroplan transactions noted above. The current quarter included a gain within an equity-accounted investment in our merchant banking portfolio, shown as an item of note.

Non-interest income was up $114 million or 8% from the prior quarter, primarily due to higher fee-based revenue, partially offset by lower net gains on available-for-sale (AFS) securities. The current quarter included the gain within an equity-accounted investment noted above.

Non-interest income for the nine months ended July 31, 2014 was up $603 million or 15% from the same period in 2013, primarily due to gains relating to the Aeroplan transactions, the sale of an equity investment in our exited European leveraged finance portfolio, and the gain within an equity-accounted investment, all shown as items of note. Higher mutual fund and investment management and custodial fees were partially offset by lower card fees as noted above, and trading losses in the current year period compared with trading income in the same period last year.

(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 down $125 million or 39% 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 which reflect credit improvements, as well as the impact of an initiative to enhance account management practices, and the sold Aeroplan portfolio. The same quarter last year included a charge resulting from a revision of estimated loss parameters on our unsecured lending portfolios, shown as an item of note. In Wholesale Banking, the provision was down as the same quarter last year included losses in our exited European leveraged finance portfolio. In Corporate and Other, the provision was down as the same quarter last year included estimated credit losses related to the Alberta floods, shown as an item of note, a portion of which was estimated to not be required and therefore reversed in the current quarter.

Provision for credit losses was down $135 million or 41% from the prior quarter. In Retail and Business Banking, the provision was comparable with the prior quarter. In Wholesale Banking, the provision was down as the prior quarter included losses in our exited U.S. leveraged finance portfolio, shown as an item of note. In Corporate and Other, the provision was down as the prior quarter included loan losses relating to FirstCaribbean International Bank Limited (CIBC FirstCaribbean), shown as an item of note.

Provision for credit losses for the nine months ended July 31, 2014 was down $107 million or 13% 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 which reflect credit improvements, as well as the impact of an initiative to enhance account management practices, and the sold Aeroplan portfolio, and lower losses in the business lending portfolio. The same period last year included a charge resulting from a revision of estimated loss parameters on our unsecured lending portfolios, and the current year period included a charge resulting from operational changes in the processing of write-offs, both shown as items of note. In Wholesale Banking, the provision was down primarily due to losses in our exited European leveraged finance portfolio in the same period last year, partially offset by higher losses in our exited U.S. leveraged finance portfolio. In Corporate and Other, the provision was up primarily due to the loan losses relating to CIBC FirstCaribbean noted above, partially offset by a decrease in the collective allowance.

Non-interest expenses
Non-interest expenses were up $169 million or 9% from the same quarter last year, primarily due to higher employee-related compensation and computer, software and office equipment expenses.

Non-interest expenses were down $365 million or 15% from the prior quarter, as the prior quarter included the goodwill impairment charge relating to CIBC FirstCaribbean, shown as an item of note, partially offset by higher employee-related compensation in the current quarter.

Non-interest expenses for the nine months ended July 31, 2014 were up $747 million or 13% from the same period in 2013, primarily due to the goodwill impairment charge relating to CIBC FirstCaribbean, and costs relating to the development of our enhanced travel rewards program and to the Aeroplan transactions, both shown as items of note, as well as higher employee-related compensation and computer, software and office equipment expenses. 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 up $22 million or 13% from the same quarter last year primarily due to higher income. Income tax expense was up $76 million or 64% from the prior quarter, primarily due to significantly higher income and taking into consideration that no tax recovery was booked in the prior quarter in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

Income tax expense for the nine months ended July 31, 2014 was up $102 million or 22% from the same period in 2013, notwithstanding comparable income levels, 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, partially offset by higher tax-exempt income.

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 $204 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 nine
			months ended					months ended
		Jul. 31, 2014			Jul. 31, 2014			Jul. 31, 2014
			vs.			vs.			vs.
$ millions		Jul. 31, 2013			Apr. 30, 2014			Jul. 31, 2013
Estimated increase (decrease) in:
	Total revenue	$	21		$	(11)		$	100
	Provision for credit losses		1			(1)			15
	Non-interest expense		9			(4)			68
	Income taxes		2			(1)			5
	Net income		9			(5)			12
Average US$ appreciation (depreciation) relative to C$			4.0	%		(2.0)	%		6.9	%

Impact of items of note in prior periods

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

Q2, 2014

$543 million ($543 million after-tax) of charges relating to 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 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 ($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 expense by $447 million, and decreased income tax expenses by $19 million. In aggregate, these items of note decreased net income by $581 million.

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.

Q3, 2013

$38 million ($28 million after-tax) increase in the portion of the collective allowance recognized in Corporate and Other⁽¹⁾, which includes $56 million of estimated credit losses relating to the Alberta floods;
$20 million ($15 million after-tax) charge resulting from a revision of estimated loss parameters on our unsecured lending portfolios (Retail and Business Banking);
$8 million ($6 million after-tax) loss from the structured credit run-off business (Wholesale Banking); and
$5 million ($4 million after-tax) amortization of intangible assets ($1 million after-tax in Retail and Business Banking, $1 million after-tax in Wealth Management, and $2 million after-tax in Corporate and Other).

The above items of note decreased revenue by $7 million, increased provision for credit losses by $58 million, non-interest expenses by $6 million, and decreased income tax expenses by $18 million. In aggregate, these items of note decreased net income by $53 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.

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.

(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.

Significant events

Goodwill impairment
During the quarter ended April 30, 2014, 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 the 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 quarter ended January 31, 2014. The net gain on sale of the sold portfolio recognized in the quarter 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 (Migration Payments).
CIBC receives annual commercial subsidy payments from TD expected to be 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.

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.

For the quarter ended July 31, 2014, CIBC incurred incremental costs of $9 million ($7 million after-tax) relating to the development of our enhanced travel rewards programs and in respect of supporting the tri-party agreements ($22 million ($16 million after-tax) in the quarter ended April 30, 2014 and $39 million ($28 million after-tax) in the quarter ended January 31, 2014). Amounts recognized in respect of Migration Payments in the quarter and nine months ended July 31, 2014 were not significant.

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 in the quarter ended January 31, 2014.

Review of quarterly financial information

$ millions, except per share amounts,
for the three months ended							2014								2013		2012
			Jul. 31		Apr. 30		Jan. 31		Oct. 31		Jul. 31		Apr. 30		Jan. 31		Oct. 31
Revenue
Retail and Business Banking		$	2,032	$	1,939	$	2,255	$	2,087	$	2,067	$	1,985	$	2,010	$	2,012
Wealth Management			568		548		502		470		458		443		432		420
Wholesale Banking ⁽¹⁾			670		606		680		520		589		574		557		567
Corporate and Other ⁽¹⁾			88		74		197		103		135		122		166		140
Total revenue		$	3,358	$	3,167	$	3,634	$	3,180	$	3,249	$	3,124	$	3,165	$	3,139
Net interest income		$	1,875	$	1,798	$	1,905	$	1,893	$	1,883	$	1,822	$	1,855	$	1,848
Non-interest income			1,483		1,369		1,729		1,287		1,366		1,302		1,310		1,291
Total revenue			3,358		3,167		3,634		3,180		3,249		3,124		3,165		3,139
Provision for credit losses			195		330		218		271		320		265		265		328
Non-interest expenses			2,047		2,412		1,979		1,930		1,878		1,825		1,988		1,823
Income before income taxes			1,116		425		1,437		979		1,051		1,034		912		988
Income taxes			195		119		260		154		173		172		127		145
Net income		$	921	$	306	$	1,177	$	825	$	878	$	862	$	785	$	843
Net income (loss) attributable to:
Non-controlling interests		$	3	$	(11)	$	3	$	(7)	$	1	$	2	$	2	$	3
Equity shareholders			918		317		1,174		832		877		860		783		840
EPS	- basic	$	2.26	$	0.73	$	2.88	$	2.02	$	2.13	$	2.09	$	1.88	$	2.00
	- diluted		2.26		0.73		2.88		2.02		2.13		2.09		1.88		2.00

(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 higher average assets under management (AUM), the impact of the acquisition of Atlantic Trust from the first quarter of 2014, 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 current quarter and the first quarter of 2014 included gains within an equity-accounted investment in our merchant banking portfolio and on the sale of an equity investment in our exited European leveraged finance portfolio, respectively, while the fourth quarter of 2013 included the impairment of an equity position in 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 (Asia) business.

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 have been trending lower since 2012 and have declined further in 2014 due to credit improvements, as well as the impact of an initiative to enhance account management practices, and the sold Aeroplan portfolio. 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 second quarter of 2014 and the fourth quarter of 2012 included losses in the exited U.S. leveraged finance portfolio. The second and third quarters of 2013 had higher losses in the exited European leveraged finance portfolio. In Corporate and Other, the second quarter of 2014 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 and third quarters 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 second quarter of 2014 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 second quarter of 2014 in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

Outlook for calendar year 2014
Global growth is on a stronger track after a poor start to the year, helped by a diminished burden from fiscal tightening in both the U.S. and Europe, and a continuation of stimulative monetary policy. After a sharp rebound from adverse weather in the second quarter, U.S. real gross domestic product (GDP) is expected to advance at a more than 3% annualized pace in the final two quarters. U.S. real GDP will benefit from a pick-up in capital spending, and the lift to household incomes and credit quality from ongoing job creation. European growth has stalled, and there are renewed recession risks associated with geopolitical tensions, while emerging markets, after a slow start to the year, should benefit from improved global trade volumes. Canada's growth rate should average in the 2.0% to 2.5% range over the final two quarters, 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 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 has reduced 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 nine
						months ended						months ended
			2014			2014			2013			2014			2013
$ millions			Jul. 31			Apr. 30			Jul. 31			Jul. 31			Jul. 31
Reported and adjusted diluted EPS
Reported net income attributable to diluted common shareholders	A	$	899		$	292		$	852		$	2,340		$	2,445
After-tax impact of items of note⁽¹⁾			(13)			581			53			342			150
After-tax impact of items of note on non-controlling interests			-			(10)			-			(10)			-
Adjusted net income attributable to diluted common shareholders⁽²⁾	B	$	886		$	863		$	905		$	2,672		$	2,595
Diluted weighted-average common shares outstanding (thousands)	C		398,022			398,519			400,258			398,584			401,621
Reported diluted EPS ($)	A/C	$	2.26		$	0.73		$	2.13		$	5.87		$	6.09
Adjusted diluted EPS ($)⁽²⁾	B/C		2.23			2.17			2.26			6.70			6.46
Reported and adjusted efficiency ratio
Reported total revenue	D	$	3,358		$	3,167		$	3,249		$	10,159		$	9,538
Pre-tax impact of items of note⁽¹⁾			(49)			8			7			(394)			(50)
TEB			102			124			90			336			279
Adjusted total revenue⁽²⁾	E	$	3,411		$	3,299		$	3,346		$	10,101		$	9,767
Reported non-interest expenses	F	$	2,047		$	2,412		$	1,878		$	6,438		$	5,691
Pre-tax impact of items of note⁽¹⁾			(17)			(447)			(6)			(519)			(179)
Adjusted non-interest expenses⁽²⁾	G	$	2,030		$	1,965		$	1,872		$	5,919		$	5,512
Reported efficiency ratio	F/D		61.0	%		76.2	%		57.8	%		63.4	%		59.7	%
Adjusted efficiency ratio⁽²⁾	G/E		59.5	%		59.6	%		56.0	%		58.6	%		56.4	%
Reported and adjusted dividend payout ratio
Reported net income attributable to common shareholders	H	$	899		$	292		$	852		$	2,340		$	2,445
After-tax impact of items of note attributable to common shareholders⁽¹⁾			(13)			571			53			332			150
Adjusted net income attributable to common shareholders⁽²⁾	I	$	886		$	863		$	905		$	2,672		$	2,595
Dividends paid to common shareholders	J	$	397		$	390		$	384		$	1,169		$	1,139
Reported dividend payout ratio	J/H		44.2	%		133.5	%		45.1	%		50.0	%		46.6	%
Adjusted dividend payout ratio⁽²⁾	J/I		44.8	%		45.2	%		42.5	%		43.8	%		43.9	%
Reported and adjusted return on common shareholders' equity
Average common shareholders' equity	K	$	16,989		$	17,173		$	15,162		$	16,911		$	14,925
Reported return on common shareholders' equity	H/K		21.0	%		7.0	%		22.3	%		18.5	%		21.9	%
Adjusted return on common shareholders' equity⁽²⁾	I/K		20.7	%		20.6	%		23.7	%		21.1	%		23.3	%
Reported and adjusted effective tax rate
Reported income before income taxes	L	$	1,116		$	425		$	1,051		$	2,978		$	2,997
Pre-tax impact of items of note⁽¹⁾			(32)			600			71			270			208
Adjusted income before income taxes⁽²⁾	M	$	1,084		$	1,025		$	1,122		$	3,248		$	3,205
Reported income taxes	N	$	195		$	119		$	173		$	574		$	472
Tax impact of items of note⁽¹⁾			(19)			19			18			(72)			58
Adjusted income taxes⁽²⁾	O	$	176		$	138		$	191		$	502		$	530
Reported effective tax rate	N/L		17.5	%		28.1	%		16.5	%		19.3	%		15.7	%
Adjusted effective tax rate⁽²⁾	O/M		16.2	%		13.5	%		17.0	%		15.5	%		16.5	%

			Retail and
			Business		Wealth		Wholesale		Corporate		CIBC
$ millions, for the three months ended			Banking	Management			Banking		and Other		Total
2014	Reported net income (loss)	$	589	$	121	$	282	$	(71)	$	921
Jul. 31	After-tax impact of items of note⁽¹⁾		8		3		(28)		4		(13)
	Adjusted net income (loss)⁽²⁾	$	597	$	124	$	254	$	(67)	$	908
2014	Reported net income (loss)	$	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
2013	Reported net income (loss)	$	612	$	102	$	212	$	(48)	$	878
Jul. 31	After-tax impact of items of note⁽¹⁾		16		1		6		30		53
	Adjusted net income (loss)⁽²⁾	$	628	$	103	$	218	$	(18)	$	931

$ millions, for the nine months ended
2014	Reported net income (loss)	$	1,881	$	352	$	759	$	(588)	$	2,404
Jul. 31	After-tax impact of items of note⁽¹⁾		(78)		10		(62)		472		342
	Adjusted net income (loss)⁽²⁾	$	1,803	$	362	$	697	$	(116)	$	2,746
2013	Reported net income (loss)	$	1,764	$	282	$	490	$	(11)	$	2,525
Jul. 31	After-tax impact of items of note⁽¹⁾		19		2		110		19		150
	Adjusted net income⁽²⁾	$	1,783	$	284	$	600	$	8	$	2,675

(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 nine
			months ended									months ended
			2014			2014			2013			2014			2013
$ millions			Jul. 31			Apr. 30			Jul. 31			Jul. 31			Jul. 31
Revenue
	Personal banking	$	1,614		$	1,539		$	1,534		$	4,729		$	4,479
	Business banking		389			368			386			1,137			1,143
	Other ⁽²⁾		29			32			147			360			440
Total revenue			2,032			1,939			2,067			6,226			6,062
Provision for credit losses			177			173			241			560			715
Non-interest expenses			1,067			1,040			1,011			3,162			2,996
Income before taxes			788			726			815			2,504			2,351
Income taxes			199			180			203			623			587
Net income		$	589		$	546		$	612		$	1,881		$	1,764
Net income attributable to:
	Equity shareholders (a)	$	589		$	546		$	612		$	1,881		$	1,764
Efficiency ratio			52.5	%		53.6	%		48.9	%		50.8	%		49.4	%
Return on equity ⁽³⁾			60.3	%		58.1	%		63.8	%		65.5	%		62.8	%
Charge for economic capital ⁽³⁾ (b)		$	(121)		$	(117)		$	(120)		$	(357)		$	(353)
Economic profit ⁽³⁾ (a+b)		$	468		$	429		$	492		$	1,524		$	1,411
Full-time equivalent employees			22,397			22,306			22,186			22,397			22,186

(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 $589 million, down $23 million from the same quarter last year, primarily due to higher non-interest expenses and lower revenue, partially offset by a lower provision for credit losses.

Net income was up $43 million from the prior quarter, mainly due to higher revenue, partially offset by higher non-interest expenses.

Net income for the nine months ended July 31, 2014 was $1,881 million, up $117 million from the same period in 2013, primarily due to higher revenue and a lower provision for credit losses, partially offset by higher non-interest expenses.

Revenue
Revenue was down $35 million or 2% from the same quarter last year.

Personal banking revenue was up $80 million, primarily due to volume growth.

Business banking revenue was comparable with the same quarter last year as volume growth was largely offset by narrower spreads.

Other revenue was down $118 million, mainly due to lower cards revenue as a result of the Aeroplan transactions with Aimia and TD.

Revenue was up $93 million or 5% from the prior quarter.

Personal banking revenue was up $75 million, primarily due to additional days in the quarter, volume growth and higher fees.

Business banking revenue was up $21 million, primarily due to additional days in the quarter and volume growth.

Other revenue was comparable with the prior quarter.

Revenue for the nine months ended July 31, 2014 was up $164 million or 3% from the same period in 2013.

Personal banking revenue was up $250 million, due to volume growth across most products, higher fees and wider spreads.

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

Other revenue was down $80 million, mainly due to lower cards revenue as a result of the Aeroplan transactions and lower revenue from our exited FirstLine mortgage broker business, partially offset by the gain relating to the Aeroplan transactions in the current year period, shown as an item of note.

Provision for credit losses
Provision for credit losses was down $64 million from the same quarter last year, mainly due to lower write-offs and bankruptcies in the card portfolio which reflect credit improvements, as well as the impact of an initiative to enhance account management practices, and the sold Aeroplan portfolio. The same quarter last year included a charge resulting from a revision of estimated loss parameters on our unsecured lending portfolios, shown as an item of note.

Provision for credit losses was comparable with the prior quarter.

Provision for credit losses for the nine months ended July 31, 2014 was down $155 million from the same period in 2013, mainly due to lower write-offs and bankruptcies in the card portfolio which reflect credit improvements, as well as the impact of an initiative to enhance account management practices, and the sold Aeroplan portfolio, and lower losses in the business lending portfolio. The same period last year included a charge resulting from a revision of estimated loss parameters on our unsecured lending portfolios, and the current year period included a charge resulting from operational changes in the processing of write-offs, both shown as items of note.

Non-interest expenses
Non-interest expenses were up $56 million or 6% from the same quarter last year, primarily due to higher spending on strategic initiatives and costs relating to the development of our enhanced travel rewards program, shown as an item of note.

Non-interest expenses were up $27 million or 3% from the prior quarter, mainly due to higher employee-related compensation, including the impact of additional days in the quarter.

Non-interest expenses for the nine months ended July 31, 2014 were up $166 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, shown as items of note, and higher spending on strategic initiatives.

Income taxes
Income taxes were down $4 million from the same quarter last year, primarily due to lower income.

Income taxes were up $19 million from the prior quarter, primarily due to higher income.

Income taxes for the nine months ended July 31, 2014 were up $36 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 nine
			months ended									months ended
			2014			2014			2013			2014			2013
$ millions			Jul. 31			Apr. 30			Jul. 31			Jul. 31			Jul. 31
Revenue
	Retail brokerage	$	307		$	292		$	267		$	883		$	788
	Asset management		186			181			159			539			456
	Private wealth management		75			75			32			196			89
Total revenue			568			548			458			1,618			1,333
Provision for credit losses			-			1			-			-			-
Non-interest expenses			408			395			326			1,154			966
Income before taxes			160			152			132			464			367
Income taxes			39			35			30			112			85
Net income		$	121		$	117		$	102		$	352		$	282
Net income attributable to:
	Non-controlling interests	$	-		$	1		$	-		$	2		$	-
	Equity shareholders (a)		121			116			102			350			282
Efficiency ratio			71.9	%		72.2	%		71.2	%		71.4	%		72.4	%
Return on equity ⁽²⁾			22.7	%		22.4	%		21.3	%		22.5	%		20.1	%
Charge for economic capital ⁽²⁾ (b)		$	(65)		$	(63)		$	(58)		$	(190)		$	(172)
Economic profit ⁽²⁾ (a+b)		$	56		$	53		$	44		$	160		$	110
Full-time equivalent employees			4,176			4,108			3,837			4,176			3,837

(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 $121 million, up $19 million from the same quarter last year, and up $4 million from the prior quarter, primarily due to higher revenue, partially offset by higher non-interest expenses.

Net income for the nine months ended July 31, 2014 was $352 million, up $70 million from the same period in 2013, primarily due to higher revenue, partially offset by higher non-interest expenses.

Revenue
Revenue was up $110 million or 24% from the same quarter last year, and up $20 million or 4% from the prior quarter.

Retail brokerage revenue was up $40 million from the same quarter last year, primarily due to higher fee-based and commission revenue, and up $15 million from the prior quarter, primarily due to higher fee-based revenue.

Asset management revenue was up $27 million from the same quarter last year, and up $5 million from the prior quarter, primarily due to higher client AUM driven by market appreciation and net sales of long-term mutual funds.

Private wealth management revenue was up $43 million from the same quarter last year, mainly due to the acquisition of Atlantic Trust on December 31, 2013, and higher AUM driven by client balance growth. Private wealth management revenue was comparable with the prior quarter.

Revenue for the nine months ended July 31, 2014 was up $285 million or 21% from the same period in 2013.

Retail brokerage revenue was up $95 million, mainly due to higher fee-based and commission revenue.

Asset management revenue was up $83 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 $107 million, mainly due to the acquisition noted above and higher AUM driven by client balance growth.

Non-interest expenses
Non-interest expenses were up $82 million or 25% from the same quarter last year, primarily due to the impact of the acquisition noted above and higher performance-based compensation.

Non-interest expenses were up $13 million or 3% from the prior quarter, primarily due to higher performance-based compensation.

Non-interest expenses for the nine months ended July 31, 2014 were up $188 million or 19% from the same period in 2013, primarily due to the impact of the acquisition noted above and higher performance-based compensation.

Income taxes
Income taxes were up $9 million from the same quarter last year, and up $4 million from the prior quarter, primarily due to higher income.

Income taxes for the nine months ended July 31, 2014 were up $27 million from the same period in 2013, primarily 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 nine
			months ended									months ended
			2014			2014			2013			2014			2013
$ millions			Jul. 31			Apr. 30			Jul. 31			Jul. 31			Jul. 31
Revenue
	Capital markets	$	336		$	331		$	348		$	997		$	986
	Corporate and investment banking		330			275			240			855			673
	Other		4			-			1			104			61
Total revenue ⁽²⁾			670			606			589			1,956			1,720
Provision for credit losses			6			21			14			29			45
Non-interest expenses			279			318			303			926			1,046
Income before taxes			385			267			272			1,001			629
Income taxes ⁽²⁾			103			54			60			242			139
Net income		$	282		$	213		$	212		$	759		$	490
Net income attributable to:
	Equity shareholders (a)	$	282		$	213		$	212		$	759		$	490
Efficiency ratio ⁽²⁾			41.5	%		52.6	%		51.3	%		47.3	%		60.8	%
Return on equity ⁽³⁾			47.5	%		36.0	%		38.6	%		42.8	%		31.0	%
Charge for economic capital ⁽³⁾ (b)		$	(73)		$	(73)		$	(69)		$	(219)		$	(197)
Economic profit ⁽³⁾ (a+b)		$	209		$	140		$	143		$	540		$	293
Full-time equivalent employees			1,327			1,248			1,302			1,327			1,302

(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 $102 million for the quarter ended July 31, 2014 (April 30, 2014: $124 million; July 31, 2013: $90 million) and $336 million for the nine months ended July 31, 2014 (July 31, 2013: $279 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 $282 million, up $70 million from the same quarter last year and up $69 million from the prior quarter, mainly due to higher revenue and lower non-interest expenses.

Net income for the nine months ended July 31, 2014 was $759 million, up $269 million from the same period in 2013, mainly due to higher revenue and lower non-interest expenses.

Revenue
Revenue was up $81 million or 14% from the same quarter last year.

Capital markets revenue was down $12 million, primarily due to lower revenue from foreign exchange trading and a lower reversal of credit valuation adjustments (CVA) against credit exposures to derivative counterparties (other than financial guarantors), partially offset by higher equity issuance revenue.

Corporate and investment banking revenue was up $90 million, mainly due to a gain within an equity-accounted investment in our merchant banking portfolio, shown as an item of note, higher equity issuance revenue and higher revenue from corporate banking and U.S. real estate finance.

Other revenue was comparable with the same quarter last year.

Revenue was up $64 million or 11% from the prior quarter.

Capital markets revenue was up $5 million, primarily due to higher equity and debt issuance revenue, partially offset by lower revenue from equity derivatives and fixed income trading.

Corporate and investment banking revenue was up $55 million, primarily due to the gain noted above and higher equity issuance revenue and advisory fees, partially offset by lower revenue from U.S. real estate finance.

Other revenue was comparable with the prior quarter.

Revenue for the nine months ended July 31, 2014 was up $236 million or 14% from the same period in 2013.

Capital markets revenue was up $11 million, primarily due to higher revenue from equity derivatives, fixed income and foreign exchange trading, and equity issuances, partially offset by a lower reversal of CVA as noted above.

Corporate and investment banking revenue was up $182 million, mainly due to higher investment portfolio gains, including the gain noted above, higher revenue from corporate banking and U.S. real estate finance, and higher revenue from equity issuances, partially offset by lower advisory revenue.

Other revenue was up $43 million, primarily due to a gain on the sale of an equity investment in our exited European leveraged finance portfolio in the current year period, shown as an item of note, 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 down $8 million from the same quarter last year, primarily due to losses in our exited European leveraged finance portfolio in the same quarter last year.

Provision for credit losses was down $15 million from the prior quarter, as the prior quarter included losses in our exited U.S. leveraged finance portfolio, shown as an item of note.

Provision for credit losses for the nine months ended July 31, 2014 was down $16 million from the same period in 2013, primarily due to losses in our exited European leveraged finance portfolio in the same period last year, partially offset by higher losses in our exited U.S. leveraged finance portfolio.

Non-interest expenses
Non-interest expenses were down $24 million or 8% from the same quarter last year, and down $39 million or 12% from the prior quarter, mainly due to lower performance-based compensation.

Non-interest expenses for the nine months ended July 31, 2014 were down $120 million or 11% from the same period in 2013, as the prior year 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, and lower performance-based compensation, partially offset by higher spending on strategic initiatives.

Income taxes
Income taxes for the quarter were up $43 million from the same quarter last year, and up $49 million from the prior quarter, primarily due to higher income.

Income taxes for the nine months ended July 31, 2014 were up $103 million from the same period in 2013, primarily due to higher income.

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 nine
		months ended						months ended
		2014		2014		2013		2014		2013
$ millions		Jul. 31		Apr. 30		Jul. 31		Jul. 31		Jul. 31
Net interest income (expense)	$	(3)	$	(10)	$	(15)	$	(26)	$	(38)
Trading income (loss)		(3)		24		12		26		65
Designated at fair value (FVO) gains (losses), net		4		(17)		(3)		(15)		(9)
Other income (loss)		1		-		(1)		1		10
Total revenue		(1)		(3)		(7)		(14)		28
Non-interest expenses		1		1		1		3		157
Loss before taxes		(2)		(4)		(8)		(17)		(129)
Income taxes		-		(1)		(2)		(4)		(34)
Net loss	$	(2)	$	(3)	$	(6)	$	(13)	$	(95)

Net loss for the quarter was $2 million (US$2 million), compared with $6 million (US$6 million) for the same quarter last year and $3 million (US$3 million) for the prior quarter. The net loss for the nine months ended July 31, 2014 was $13 million (US$12 million), down $82 million (US$81 million) from the same period in 2013.

Net loss for the quarter was mainly due to 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 and net interest expense. These were partially offset by gains on unhedged positions and a reduction in CVA relating to financial guarantors.

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 July 31, 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	$	-	$	-		$	-	$	-	$	216	$	154	$	-	$	-	$	216	$	154
CLO		1,669		1			1,623		1,627		1,535		19		2,880		32		78		2
Corporate debt		-		-			-		-		4,085		2		-		-		4,085		4
Other		592		402			28		26		407		33		18		2		12		1
Unmatched		-		-			-		-		-		-		-		-		459		-
	$	2,261	$	403		$	1,651	$	1,653	$	6,243	$	208	$	2,898	$	34	$	4,850	$	161
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 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$15 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$62 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. (65%) and European-based (33%) senior secured leveraged loans. As at July 31, 2014, approximately 68% of the total notional amount of the CLO tranches was rated equivalent to AAA, 29% was rated between the equivalent of AA+ and AA-, and the remainder was the equivalent of A or lower. As at July 31, 2014, approximately 19% of the underlying collateral was rated equivalent to BB- or higher, 58% was rated between the equivalent of B+ and B-, 4% 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 29-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 July 31, 2014, include:

Variable rate Class A-1/A-2 notes classified as trading securities with a notional value of US$265 million and a fair value of US$242 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$126 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$104 million;
US$49 million notional value of CDO trading securities with collateral consisting of high-yield corporate debt portfolios with a fair value of US$48 million; and
US$29 million notional value of an asset-backed security (ABS) classified as a loan, with fair value of US$28 million and carrying value of US$26 million.

Our significant positions in the Written credit derivatives, liquidity and credit facilities section within Other, as at July 31, 2014, include:

US$266 million notional value of written credit derivatives with a fair value of US$32 million, on inflation-linked notes, and CDO tranches with collateral consisting of non-U.S. residential mortgage-backed securities and TruPs; and
US$87 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 July 31, 2014			CLO	debt		USRMM			Other	Unmatched		notional		before CVA			CVA	net of CVA
Financial guarantors ⁽¹⁾
	Investment grade	$	1,794	$	-	$	-	$	18	$	-	$	1,812	$	31	$	(5)	$	26
	Unrated		1,086		-		-		-		-		1,086		12		(4)		8
			2,880		-		-		18		-		2,898		43		(9)		34
Other counterparties ⁽¹⁾
	Investment grade		78		10		216		12		-		316		156		1		157
	Unrated		-		4,075		-		-		459		4,534		4		-		4
			78		4,085		216		12		459		4,850		160		1		161
		$	2,958	$	4,085	$	216	$	30	$	459	$	7,748	$	203	$	(8)	$	195
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 July 31, 2014 was US$275 million relative to US$4 million of net exposure.

Lehman Brothers bankruptcy proceedings
During the quarter ended January 31, 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 nine
			months ended						months ended
			2014		2014		2013		2014		2013
$ millions			Jul. 31		Apr. 30		Jul. 31		Jul. 31		Jul. 31
Revenue
	International banking	$	151	$	146	$	142	$	451	$	445
	Other		(63)		(72)		(7)		(92)		(22)
Total revenue ⁽²⁾			88		74		135		359		423
Provision for credit losses			12		135		65		154		90
Non-interest expenses			293		659		238		1,196		683
Loss before taxes			(217)		(720)		(168)		(991)		(350)
Income taxes ⁽²⁾			(146)		(150)		(120)		(403)		(339)
Net loss		$	(71)	$	(570)	$	(48)	$	(588)	$	(11)
Net income (loss) attributable to:
	Non-controlling interests	$	3	$	(12)	$	1	$	(7)	$	5
	Equity shareholders		(74)		(558)		(49)		(581)		(16)
Full-time equivalent employees			17,261		16,245		16,191		17,261		16,191

(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 $71 million, up $23 million from the same quarter last year, primarily due to higher non-interest expenses and lower revenue, partially offset by a lower provision for credit losses.

Net loss was down $499 million from the prior quarter, primarily due to lower non-interest expenses and provision for credit losses.

Net loss for the nine months ended July 31, 2014 was $588 million, up $577 million from the same period last year, primarily due to higher non-interest expenses, provision for credit losses and lower revenue.

Revenue
Revenue was down $47 million or 35% from the same quarter last year.

International banking revenue was up $9 million, due to higher revenue from CIBC FirstCaribbean, including the impact of favourable foreign exchange rates.

Other revenue was down $56 million, primarily due to lower treasury revenue.

Revenue was up $14 million or 19% from the prior quarter.

International banking revenue was up $5 million, primarily due to higher revenue from CIBC FirstCaribbean.

Other revenue was up $9 million, primarily due to a lower TEB adjustment, partially offset by lower treasury revenue.

Revenue for the nine months ended July 31, 2014 was down $64 million or 15% from the same period last year.

International banking revenue was up $6 million, due to favourable foreign exchange rates. The same period last year included a gain on the sale of our private wealth management (Asia) business, shown as an item of note.

Other revenue was down $70 million, primarily due to lower treasury revenue and a higher TEB adjustment, partially offset by the gain relating to the Aeroplan transactions with Aimia and TD, shown as an item of note in the current year period.

Provision for credit losses
Provision for credit losses was down $53 million from the same quarter last year, as the same quarter last year included estimated credit losses related to the Alberta floods, shown as an item of note, a portion of which was estimated to not be required and therefore reversed in the current quarter.

Provision for credit losses was down $123 million from the prior quarter, as the prior quarter included loan losses relating to CIBC FirstCaribbean, shown as an item of note.

Provision for credit losses for the nine months ended July 31, 2014 was up $64 million from the same period last year, primarily due to the loan losses relating to CIBC FirstCaribbean noted above, partially offset by a decrease in the collective allowance.

Non-interest expenses
Non-interest expenses were up $55 million or 23% from the same quarter last year, mainly due to higher unallocated corporate support costs.

Non-interest expenses were down $366 million or 56% from the prior quarter, primarily due to the goodwill impairment charge relating to CIBC FirstCaribbean, shown as an item of note in the prior quarter, partially offset by higher unallocated corporate support costs.

Non-interest expenses for the nine months ended July 31, 2014 were up $513 million or 75% from the same period last year, primarily due to the charge noted above and higher unallocated corporate support costs.

Income taxes
Income tax benefit was up $26 million from the same quarter last year, primarily due to a higher loss, including a higher TEB adjustment.

Income tax benefit was comparable with the prior quarter. No tax recovery was booked in the prior quarter in respect of the CIBC FirstCaribbean goodwill impairment charge and loan losses.

Income tax benefit for the nine months ended July 31, 2014 was up $64 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		Jul. 31		Oct. 31
Assets
Cash and deposits with banks	$	11,192	$	6,379
Securities		69,461		71,984
Securities borrowed or purchased under resale agreements		28,343		28,728
Loans and acceptances, net of allowance		262,489		256,380
Derivative instruments		18,227		19,947
Other assets		15,710		14,588
	$	405,422	$	398,006
Liabilities and equity
Deposits	$	322,314	$	315,164
Obligations related to securities lent or sold short or under repurchase agreements		23,599		20,313
Derivative instruments		17,957		19,724
Other liabilities		18,853		20,583
Subordinated indebtedness		4,187		4,228
Equity		18,512		17,994
	$	405,422	$	398,006

Assets
As at July 31, 2014, total assets were up by $7.4 billion or 2% from October 31, 2013.

Cash and deposits with banks increased by $4.8 billion or 75%, mostly due to higher treasury deposit placements.

Securities decreased by $2.5 billion or 4%, 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.

Securities borrowed or purchased under resale agreements decreased by $385 million or 1%, primarily due to treasury investment management activities.

Net loans and acceptances increased by $6.1 billion or 2%. Business and government loans and acceptances were up by $4.5 billion, largely due to an increase in our domestic lending portfolio. Residential mortgages were up by $4.0 billion, primarily due to growth in CIBC-branded mortgages, partially offset by attrition in the exited FirstLine mortgage broker business. Personal loans were up $642 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 $1.7 billion or 9%, largely driven by the decrease in interest rate derivatives valuation, partially offset by an increase in foreign exchange derivatives valuation.

Other assets increased by $1.1 billion or 8%, primarily due to an increase in collateral pledged for derivatives and assets acquired as a result of the acquisition of Atlantic Trust, partially offset by the goodwill impairment relating to CIBC FirstCaribbean.

Liabilities
As at July 31, 2014, total liabilities were up by $6.9 billion or 2% from October 31, 2013.

Deposits increased by $7.2 billion or 2%, primarily due to retail volume growth, partially offset by lower outstanding secured borrowings. 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 $3.3 billion or 16%, primarily due to client-driven activities.

Derivative instruments decreased by $1.8 billion or 9%, largely driven by a decrease in interest rate derivatives valuation, partially offset by an increase in foreign exchange derivatives valuation.

Other liabilities decreased by $1.7 billion or 8%, mainly due to lower acceptances.

Subordinated indebtedness decreased by $41 million or 1%, primarily due to redemptions during the year. See the "Significant capital management activity" section below.

Equity
As at July 31, 2014, equity increased by $518 million or 3% from October 31, 2013, primarily due to a net increase in retained earnings and issuance of preferred shares. These were partially offset by the redemption of our preferred shares and the 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, accumulated other comprehensive income (AOCI) (excluding AOCI relating to cash flow hedges), and qualifying instruments issued by a consolidated subsidiary to third parties, 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 non-viability contingent capital (NVCC) preferred shares, qualifying instruments issued by a consolidated subsidiary to third parties, and non-qualifying preferred shares and innovative Tier 1 notes, which are subject to phase-out rules for capital instruments. Tier 2 capital includes non-qualifying subordinated indebtedness subject to phase-out rules for capital instruments, eligible collective allowance under the standardized approach, and qualifying instruments issued by a consolidated subsidiary to third parties.

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.

On July 30, 2014, OSFI issued a draft "Leverage Requirements Guideline" outlining the implementation of the Basel III Leverage Ratio framework in Canada effective January 1, 2015. The Basel III Leverage Ratio will replace the current assets-to-capital multiple (ACM) test. Federally regulated deposit-taking institutions will be expected to have Basel III leverage ratios in excess of 3%. Public disclosure of the Leverage Ratio is effective from the first quarter of 2015. The reporting requirements are outlined in the draft "Public Capital Disclosure Requirements related to Basel III Leverage Ratio" issued by OSFI on June 27, 2014. CIBC expects to be in compliance with the new requirements.

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.

Proposed revisions to Pillar 3 disclosure requirements
On June 24, 2014, the BCBS issued a consultative document titled "Review of the Pillar 3 disclosure requirements". The document sets out the first-phase review findings, of a two-phase project, by the BCBS and outlines proposed revisions to the existing Pillar 3 disclosure requirements for credit (including counterparty credit), market, equity and securitization risks.

These disclosure requirements are proposed to be implemented in 2016. CIBC will continue to monitor and prepare for developments in this area.

Taxpayer Protection and Bank Recapitalization Regime
The Department of Finance published a consultation paper on August 1, 2014 on the Taxpayer Protection and Bank Recapitalization (bail-in) regime. The overarching policy objective is to preserve financial stability while protecting taxpayers in the event of a large bank (D-SIB) failure. The bail-in regime is designed to enable the expedient conversion of certain bank liabilities (bail-in debt) into common equity, thus ensuring that the D-SIB emerges from conversion as well-capitalized. Prior to conversion of the bail-in debt, all capital instruments that meet the Basel III requirements for absorption of loss at the point of non-viability must have been converted into common equity.

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

		2014			2014			2013
$ millions, as at		Jul. 31			Apr. 30			Oct. 31
Transitional basis
CET1 capital	$	16,983		$	16,532		$	16,698
Tier 1 capital		18,491			18,076			17,830
Total capital		22,081			21,581			21,601
RWA		155,644			152,044			151,338
CET1 ratio		10.9	%		10.9	%		11.0	%
Tier 1 capital ratio		11.9	%		11.9	%		11.8	%
Total capital ratio		14.2	%		14.2	%		14.3	%
ACM		18.2	x		18.1	x		18.0	x
All-in basis ⁽¹⁾
CET1 capital	$	14,153		$	13,641		$	12,793
Tier 1 capital		17,093			16,488			15,888
Total capital		20,784			20,206			19,961
CET1 capital RWA		139,920			135,883			136,747
Tier 1 capital RWA		140,174			135,883			136,747
Total capital RWA		140,556			135,883			136,747
CET1 ratio		10.1	%		10.0	%		9.4	%
Tier 1 capital ratio		12.2	%		12.1	%		11.6	%
Total capital ratio		14.8	%		14.9	%		14.6	%

(1)

Commencing the third quarter of 2014, there are different levels of RWAs
for the calculation of the CET1, Tier 1 and total capital ratios arising from
the option CIBC has chosen for the phase-in of the CVA capital charge.

CET1 ratio (All-in basis)
CET1 ratio increased 0.1% from April 30, 2014. During the quarter, CET1 capital after regulatory adjustments increased, largely due to internal capital generation (net income less dividends and shares repurchased for cancellation), while regulatory deductions declined. CET1 capital RWAs increased by $4.0 billion from April 30, 2014, primarily due to capital model parameter updates for our wholesale lending portfolios and business and other asset growth.

CET1 ratio increased 0.7% from October 31, 2013. CET1 capital increased due to internal capital generation. While the earnings were impacted by the write-down of CIBC FirstCaribbean goodwill, its impact on capital was neutral. CET1 capital RWAs increased $3.2 billion due to commencement of the phase-in of the CVA capital charge in the first quarter of 2014, capital model parameter updates, business growth and foreign exchange. These factors were partially offset by the sale of the Aeroplan portfolio, portfolio quality improvements, refinements to the treatment of our OTC derivatives and reductions in our AFS portfolios.

ACM
The ACM increased 0.1 times from April 30, 2014. Capital for ACM purposes increased during the quarter due to the positive impact of internal capital generation and the net impact of the issuance of qualifying preferred shares and the redemption of non-qualifying preferred shares. The impact of higher capital was offset by the impact of an increase in assets for ACM purposes.

The ACM increased 0.2 times from October 31, 2013. Total capital for ACM purposes increased mainly due to internal capital generation and the issuance of preferred shares, partially offset by the redemption of preferred shares and an additional 10% phase-out of non-qualifying Tier 1 and Tier 2 capital in 2014. Assets for ACM purposes also increased during the period.

Significant capital management activity

Subordinated debt
On July 25, 2014, we purchased and cancelled $11 million (US$10 million) of our floating rate Debentures (subordinated indebtedness) due July 31, 2084, and $9 million (US$8 million) of our floating rate Debentures (subordinated indebtedness) due August 31, 2085.

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 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.

We intend to seek Toronto Stock Exchange approval for a new normal course issuer bid that would permit us to purchase for cancellation up to a maximum of 8 million, or approximately 2% of our outstanding common shares, over the next 12 months.

During the quarter ended July 31, 2014, we purchased and cancelled an additional 759,500 common shares under this bid at an average price of $97.58 for a total amount of $74 million. For the nine months ended July 31, 2014, we purchased and cancelled 3,089,200 common shares under this bid at an average price of $92.66 for a total amount of $286 million. Since the inception of this bid, we have purchased and cancelled 4,013,100 common shares at an average price of $90.52 for a total amount of $363 million.

Dividends
Our quarterly common share dividend was increased from $0.98 per share to $1.00 per share from the quarter ended July 31, 2014 and from $0.96 per share to $0.98 per share from the quarter ended April 30, 2014.

Preferred shares
On June 11, 2014, we issued 16 million Non-cumulative Rate Reset Class A Preferred Shares Series 39 (Series 39 shares) with a par value of $25.00 per share, for gross proceeds of $400 million. For the initial five year period to the earliest redemption date of July 31, 2019, the Series 39 shares pay quarterly cash dividends, if declared, at a rate of 3.90%. On July 31, 2019, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.32%.

Holders of the Series 39 shares will have the right to convert their shares on a one-for-one basis into non-cumulative Floating Rate Class A Preferred Shares Series 40 (Series 40 shares), subject to certain conditions, on July 31, 2019 and on July 31 every five years thereafter. Holders of the Series 40 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 2.32%. Holders of the Series 40 shares may convert their shares on a one-for-one basis into Series 39 shares, subject to certain conditions, on July 31, 2024 and on July 31 every five years thereafter.

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 39 shares at par on July 31, 2019, and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 40 shares at par on July 31, 2024, and on July 31 every five years thereafter.

The shares include an NVCC provision, necessary for the shares to qualify as regulatory capital under Basel III. As such, the shares are convertible into common shares if OSFI determines that the bank is or is about to become non-viable or if the bank accepts a capital injection or equivalent support from the government to avoid non-viability. In such an event, each share is convertible into a number of common shares, determined by dividing the par value of $ 25.00 plus declared and unpaid dividends by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price of $ 5.00 per share (subject to adjustment in certain events as defined in the relevant prospectus supplement). Absent any outstanding declared but unpaid dividends, the maximum number of shares issuable on conversion of the Series 39 and Series 40 shares would be 80 million common shares.

Our existing Class A Preferred Shares Series 26, 27, and 29 are also subject to an NVCC provision through a separate undertaking to OSFI. Similar to the Series 39 and Series 40 shares, each such share is convertible into a number of common shares, determined by dividing the then applicable cash redemption price by 95% of the average common share price (as defined in the relevant short form prospectus or prospectus supplement), subject to a minimum price of $2.00 per share. For these shares, absent any outstanding declared but unpaid dividends, the maximum number of common shares issuable on conversion would be 440,404,275 shares.

On July 31, 2014, we redeemed all of our 12 million Non-cumulative Rate Reset Class A Preferred Shares Series 33 with a par value and redemption price of $25.00 per share for cash, and we redeemed all of our 8 million Non-cumulative Rate Reset Class A Preferred Shares Series 37 with a par value and redemption price of $25.00 per share for cash.

On April 30, 2014, we redeemed all of our 13 million Non-cumulative Rate Reset Class A Preferred Shares Series 35 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 a commercial mortgage securitization trust.

We utilize a single-seller conduit and several CIBC-sponsored multi-seller conduits to fund assets for clients (collectively, the conduits) in Canada.

As at July 31, 2014, the underlying collateral for various asset types in our non-consolidated sponsored multi-seller conduits amounted to $2.8 billion (October 31, 2013: $2.1 billion). The estimated weighted-average life of these assets was 1.1 years (October 31, 2013: 1.1 years). Our holding of commercial paper issued by our non-consolidated sponsored multi-seller conduits that offer commercial paper to external investors was $15 million (October 31, 2013: $9 million). Our committed backstop liquidity facilities to these conduits were $4.0 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 July 31, 2014.

We participated in a syndicated facility for a 3-year commitment of $575 million to the 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 July 31, 2014, we funded $80 million (October 31, 2013: $81 million) through the issuance of bankers' acceptances.

									2014									2013
$ millions, as at									Jul. 31									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⁾
Single-seller and multi-seller conduits		$	95		$	2,798	⁽³⁾	$	-		$	90		$	2,151	⁽³⁾	$	-
CIBC-structured CDO vehicles			61			45			123			135			43			134
Third-party structured vehicles
	Structured credit run-off		2,643			95			1,922			3,456			236			2,966
	Continuing		1,394			690			-			756			534			-
Pass-through investment structures			2,440			-			-			3,090			-			-
Commercial mortgage securitization trust			9			-			-			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). $2.1 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 $248 million (October 31, 2013: $368 million). Notional of $1.8 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 $185 million (October 31, 2013: $213 million). An additional notional of $51 million (October 31, 2013: $161 million) was hedged through a limited recourse note. Accumulated fair value losses were $7 million (October 31, 2013: $15 million) on unhedged written credit derivatives.

(3)

Excludes an additional $1.3 billion (October 31, 2013: $1.1 billion) relating to our backstop liquidity facilities provided to the multi-seller conduits as part of their commitment to fund purchases of additional assets.

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.

This section describes the main top and emerging risks that we consider with potential negative implications, as well as regulatory and accounting developments that are material for CIBC.

Canadian consumer debt and the housing market
Canadians have been increasing debt levels over the past half decade at a pace that has exceeded growth in their income. Most of the increase in household debt levels is driven by higher levels of mortgage debt, which is tied to the Canadian housing market. Concerns have been raised by both the International Monetary Fund and the Bank of Canada regarding growth of the debt burden of Canadian households. Due to the recession and the global financial crisis experienced in 2008, interest rates have declined to a very low level. Based on historical observations, the level of interest rates is not sustainable in the long run and rates are expected to rise sometime in the future. When interest rates start to rise, the ability of Canadians to repay their loans may be adversely affected, which may trigger a correction in the housing market, which in turn could result in credit losses to banks. Currently, we qualify all variable rate mortgage borrowers using the Bank of Canada 5-year fixed benchmark rate, which is typically higher than the variable rate by approximately 2 percentage points. If there were an interest rate increase, our variable rate borrowers should be able to withstand some increase in the interest rate. We believe the risk of a severe housing crash that generates significant losses for mortgage portfolios is unlikely, but the risk associated with high levels of consumer debt will continue to be an ongoing concern. For additional details on our credit risk mitigation strategies and the latest status of our real estate secured lending, see the "Real estate secured personal lending" section in Credit risk.

U.S. fiscal deficit risk
There is tacit agreement in U.S. Congress that another costly government shutdown must be avoided, especially during an election year. Moreover, Moody's revised the U.S. credit rating outlook to Aaa-stable from Aaa-negative based on the latest status of the U.S. economy. However, given the high debt levels, an unexpected shock to the U.S. economy could lead to a Canadian economic slowdown or recession, which affects credit demand in Canada and typically increases credit losses.

Technology, information and cyber security risk
We are also exposed to cyber threats and the associated financial, reputation and business interruption risks. For additional information on these risks and our mitigation strategies, see the "Other risks" section on pages 70 to 72 of the 2013 Annual Report.

Geo-political risk
The level of geo-political risk escalates at certain points in time, with the focus changing from one region to another and within a region from country to country. While the specific impact on the global economy would depend on the nature of the event (e.g., a Middle Eastern conflict could lead to disruption in global oil supplies resulting in high prices), in general, any major event could result in instability and volatility, leading to widening spreads, declining equity valuations, flight to safe-haven currencies and increased purchases of gold. In the short run, market shocks could hurt the net income of our trading and non-trading market risk positions. Although Canada is unlikely to be directly affected, the indirect impact of reduced economic growth has serious negative implications for general economic and banking activities.

China economic policy risk
Even though fears of a hard landing have receded substantially, the issues of easy credit and deteriorating credit quality have not been addressed, causing stress in the banking sector as well as in the shadow banking system. Economic growth is expected to be modest by historical standards, with a medium-term growth rate trend at 7.5%, notably lower than the double-digit growth of the recent past. We have little direct exposure to China, but any negative impact from the Chinese economic slowdown may affect our clients that export to China, commodities in particular, and may raise the credit risk associated with our exposure to trading counterparties.

European sovereign debt crisis
While the European Central Bank's new outright monetary transactions programme has eased pressure on peripheral bond yields and has led to a normalization of financial conditions, thus ensuring the safety of the euro, risks to the global financial markets from Europe's sovereign debt crisis have not completely dissipated. Unfavourable economic or political events could bring the debt crisis into sharper focus again, denting financial market confidence and keeping any recovery in Eurozone growth in low gear or even returning to recession. We have no peripheral sovereign exposure and very little peripheral non-sovereign direct exposure. For additional details on our European exposure, see the "Exposure to certain countries and regions" section in Credit risk.

Regulatory developments
See the "Capital resources", "Liquidity risk" and "Accounting and control matters" sections for additional information on regulatory developments.

Accounting developments
See Note 1 to the interim consolidated financial statements for additional information on accounting developments.

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 July 31, 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		Jul. 31		Oct. 31
Business and government portfolios-advanced internal ratings-based (AIRB) approach
Drawn	$	87,566	$	84,016
Undrawn commitments		38,799		35,720
Repo-style transactions		62,802		57,975
Other off-balance sheet		67,438		51,885
OTC derivatives		12,320		13,255
Gross exposure at default (EAD) on business and government portfolios		268,925		242,851
Less: repo collateral		55,884		51,613
Net EAD on business and government portfolios		213,041		191,238
Retail portfolios-AIRB approach
Drawn		197,350		195,796
Undrawn commitments		64,658		65,424
Other off-balance sheet		299		417
Gross EAD on retail portfolios		262,307		261,637
Standardized portfolios		11,843		10,798
Securitization exposures		15,084		16,799
Gross EAD	$	558,159	$	532,085
Net EAD	$	502,275	$	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 nine months ended July 31, 2014, $27 million and $95 million, respectively ($8 million and $27 million for the quarter and nine months ended July 31, 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 July 31, 2014	Insured				Uninsured				Uninsured				Insured				Uninsured
Ontario	$	47.9	69	%	$	21.7	31	%	$	9.5	100	%	$	47.9	61	%	$	31.2	39	%
British Columbia		18.9	63			11.0	37			3.9	100			18.9	56			14.9	44
Alberta		17.3	75			5.9	25			2.7	100			17.3	67			8.6	33
Quebec		7.8	71			3.1	29			1.4	100			7.8	63			4.5	37
Other		11.9	77			3.6	23			1.8	100			11.9	69			5.4	31
Canadian portfolio⁽²⁾⁽³⁾		103.8	70			45.3	30			19.3	100			103.8	62			64.6	38
International portfolio⁽²⁾		-	-			2.0	100			-	-			-	-			2.0	100
Total portfolio	$	103.8	69	%	$	47.3	31	%	$	19.3	100	%	$	103.8	61	%	$	66.6	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 July 31, 2014 and October 31, 2013.
(2)	Geographical allocation is based on the address of the property managed.
(3)	90% (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 average LTV ratio⁽¹⁾ of our uninsured international residential mortgages originated during the quarter was 78%. We did not originate HELOCs for our international portfolio during the quarter ended July 31, 2014. We did not acquire uninsured residential mortgages and HELOCs from a third party for the periods presented in the table below.

									For the three months ended								For the nine months ended
			2014 Jul. 31				2014 Apr. 30				2013 Jul. 31				2014 Jul. 31				2013 Jul. 31
	Residential mortgages		HELOC		Residential mortgages		HELOC		Residential mortgages		HELOC		Residential mortgages		HELOC		Residential mortgages		HELOC
Ontario	71	%	71	%	71	%	70	%	71	%	70	%	71	%	70	%	71	%	70	%
British Columbia	67		66		67		66		67		66		67		66		67		66
Alberta	74		72		73		72		72		71		73		72		72		70
Quebec	74		72		73		72		73		72		73		72		72		71
Other	74		73		74		73		74		73		74		73		74		72
Total Canadian portfolio⁽²⁾	71	%	70	%	71	%	70	%	71	%	70	%	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
July 31, 2014⁽¹⁾	59	%	59	%
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 July 31, 2014 are based on Teranet - National Bank National Composite House Price Index (Teranet) as of September 30, 2013 and June 30, 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
	July 31, 2014	-	%	1	%	3	%	10	%	21	%	46	%	19	%	-	%
	October 31, 2013	1	%	1	%	3	%	12	%	19	%	39	%	25	%	-	%
International portfolio
	July 31, 2014	7	%	16	%	25	%	26	%	16	%	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
	July 31, 2014	3	%	6	%	10	%	14	%	27	%	31	%	9	%	-	%
	October 31, 2013	3	%	6	%	11	%	15	%	24	%	28	%	12	%	1	%
International portfolio
	July 31, 2014	7	%	16	%	24	%	25	%	16	%	9	%	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 July 31, 2014, our Canadian condominium mortgages were $16.9 billion (October 31, 2013: $16.6 billion) of which 72% (October 31, 2013: 74%) were insured. Our drawn developer loans were $1,012 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 80 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			Jul. 31					Oct. 31
		Exposure⁽¹⁾
Investment grade	$	4.50		84.2	%	$	4.59		85.0	%
Non-investment grade		0.77		14.4			0.78		14.5
Watchlist		0.06		1.1			0.03		0.5
Unrated		0.01		0.3			-		-
	$	5.34		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 nine months ended
$ millions						2014 Jul. 31							2014 Apr. 30							2013 Jul. 31							2014 Jul. 31							2013 Jul. 31
		Business and government loans		Consumer loans			Total		Business and government loans		Consumer loans			Total		Business and government loans		Consumer loans			Total		Business and government loans		Consumer loans			Total		Business and government loans		Consumer loans			Total
Gross impaired loans
Balance at beginning of period		$	790	$	731		$	1,521	$	841	$	746		$	1,587	$	931	$	761		$	1,692	$	843	$	704		$	1,547	$	1,128	$	739		$	1,867
	Classified as impaired during the period		53		308			361		46		291			337		114		374			488		164		951			1,115		291		1,119			1,410
	Transferred to not impaired during the period		(2)		(33)			(35)		(2)		(31)			(33)		-		(30)			(30)		(7)		(84)			(91)		(4)		(61)			(65)
	Net repayments		(23)		(60)			(83)		(50)		(54)			(104)		(68)		(119)			(187)		(158)		(174)			(332)		(256)		(298)			(554)
	Amounts written-off		(38)		(210)			(248)		(34)		(214)			(248)		(38)		(324)			(362)		(94)		(679)			(773)		(226)		(840)			(1,066)
	Recoveries of loans and advances previously written-off		-		-			-		-		-			-		-		-			-		-		-			-		-		-			-
	Disposals of loans		(18)		-			(18)		-		-			-		-		-			-		(18)		-			(18)		-		-			-
	Foreign exchange and other		(4)		(2)			(6)		(11)		(7)			(18)		16		6			22		28		16			44		22		9			31
Balance at end of period		$	758	$	734		$	1,492	$	790	$	731		$	1,521	$	955	$	668		$	1,623	$	758	$	734		$	1,492	$	955	$	668		$	1,623
Allowance for impairment ⁽¹⁾
Balance at beginning of period		$	368	$	305		$	673	$	348	$	227		$	575	$	403	$	247		$	650	$	323	$	224		$	547	$	492	$	229		$	721
	Amounts written-off		(38)		(210)			(248)		(34)		(214)			(248)		(38)		(324)			(362)		(94)		(679)			(773)		(226)		(840)			(1,066)
	Recoveries of amounts written-off in previous periods		2		44			46		3		47			50		2		47			49		10		136			146		8		131			139
	Charge to income statement		37		177			214		59		263			322		39		248			287		132		647			779		142		701			843
	Interest accrued on impaired loans		(3)		(4)			(7)		(2)		(6)			(8)		(5)		(5)			(10)		(11)		(13)			(24)		(16)		(12)			(28)
	Disposals of loans		-		-			-		-		-			-		-		-			-		-		-			-		-		-			-
	Foreign exchange and other		(5)		-			(5)		(6)		(12)			(18)		4		4			8		1		(3)			(2)		5		8			13
Balance at end of period		$	361	$	312		$	673	$	368	$	305		$	673	$	405	$	217		$	622	$	361	$	312		$	673	$	405	$	217		$	622
Net impaired loans
Balance at beginning of period		$	422	$	426		$	848	$	493	$	519		$	1,012	$	528	$	514		$	1,042	$	520	$	480		$	1,000	$	636	$	510		$	1,146
	Net change in gross impaired		(32)		3			(29)		(51)		(15)			(66)		24		(93)			(69)		(85)		30			(55)		(173)		(71)			(244)
	Net change in allowance		7		(7)			-		(20)		(78)			(98)		(2)		30			28		(38)		(88)			(126)		87		12			99
Balance at end of period		$	397	$	422		$	819	$	422	$	426		$	848	$	550	$	451		$	1,001	$	397	$	422		$	819	$	550	$	451		$	1,001
Net impaired loans as a percentage of net loans and acceptances								0.31%							0.33%							0.39%							0.31%							0.39%

(1)

Includes collective allowance relating to personal, scored small business and mortgage impaired loans that are greater than 90 days delinquent, and individual allowance.

Gross impaired loans
As at July 31, 2014, gross impaired loans were $1,492 million, down $131 million from the same quarter last year, primarily due to decreases in the real estate and construction, the publishing, printing and broadcasting, and the transportation sectors in the business and government loans, partially offset by an increase in residential mortgages relating to CIBC FirstCaribbean.

The gross impaired loans were down $29 million from the prior quarter, primarily due to decreases in the transportation and the real estate and construction sectors, partially offset by an increase in the utilities sector in the business and government loans. Consumer gross impaired loans were comparable with the prior quarter.

After experiencing an increase during the 2009 recession, gross impaired loans stabilized in 2011 and showed some improvements since 2012. Almost half of the consumer gross impaired loans at the end of this quarter were from Canada, in which insured mortgages accounted for the majority, and where losses are expected to be minimal. The remaining consumer gross impaired loans were in CIBC FirstCaribbean. Gross impaired loans 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 $51 million or 8% from the same quarter last year.

The individually assessed allowance for business and government loans decreased by $48 million or 12%, mainly due to decreases in the publishing, printing and broadcasting, and the real estate and construction sectors, partially offset by an increase in the non-residential mortgages portfolio relating to CIBC FirstCaribbean. 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 decrease in the real estate and construction sector was primarily in the U.S. The individually assessed allowance for consumer loans was comparable with the same quarter last year.

The collectively assessed allowance for consumer loans was up $95 million or 46%, due to an increase in the residential mortgage portfolio relating to CIBC FirstCaribbean, reflecting revised expectations on the extent and timing of the anticipated economic recovery in the Caribbean region. The collectively assessed allowance for business and government loans was comparable with the same quarter last year.

The allowance for impairment was comparable with the prior quarter.

The individually assessed allowance for business and government loans decreased by $9 million or 3% from the prior quarter, largely due to the sale of an account in the transportation sector in the exited U.S. leveraged finance portfolio, partially offset by small increases across various other sectors. The individually assessed allowance for consumer loans was comparable with the prior quarter.

The collectively assessed allowance for consumer loans was up $7 million or 2%, mainly due to an increase in the personal lending portfolio relating to CIBC FirstCaribbean. The collectively assessed allowance for business and government loans was comparable with the prior quarter.

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.

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
$ millions, as at July 31, 2014	Corporate		Sovereign			Bank		Total funded (A)	Corporate				Bank	Total unfunded (B)
Austria	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Belgium		6		-		25		31		-			15		15
Finland		195		1		2		198		62			-		62
France		77		-		3		80		220			7		227
Germany		76		6		173		255		13			21		34
Greece		-		-		-		-		-			-		-
Ireland		1		-		5		6		-			7		7
Italy		-		-		-		-		-			-		-
Luxembourg		20		-		187		207		8			-		8
Malta		-		-		-		-		-			-		-
Netherlands		11		145		55		211		166			1		167
Portugal		-		-		-		-		-			-		-
Spain		-		-		1		1		-			-		-
Total Eurozone	$	386	$	152	$	451	$	989	$	469		$	51	$	520
Czech Republic	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Denmark		-		-		1		1		-			9		9
Norway		-		85		132		217		-			-		-
Russia		-		-		-		-		-			-		-
Sweden		178		98		347		623		7			-		7
Switzerland		221		-		162		383		26			-		26
Turkey		-		-		161		161		-			5		5
United Kingdom		576		368		460		1,404		2,213	⁽¹⁾		384		2,597
Total non-Eurozone	$	975	$	551	$	1,263	$	2,789	$	2,246		$	398	$	2,644
Total Europe	$	1,361	$	703	$	1,714	$	3,778	$	2,715		$	449	$	3,164
October 31, 2013	$	1,610	$	815	$	1,548	$	3,973	$	1,910		$	220	$	2,130

(1)

Includes $191 million of exposure (notional value of $219 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
$ millions, as at July 31, 2014	Corporate		Sovereign			Bank	Gross exposure		⁽¹⁾	Collateral held		⁽²⁾	Net exposure (C)		Total direct exposure (A)+(B)+(C)
Austria	$	-	$	-	$	26	$	26		$	26		$	-	$	-
Belgium		-		1		33		34			33			1		47
Finland		3		-		3		6			-			6		266
France		4		242		786		1,032			1,024			8		315
Germany		1		-		1,966		1,967			1,804			163		452
Greece		-		-		-		-			-			-		-
Ireland		-		-		322		322			316			6		19
Italy		-		-		8		8			-			8		8
Luxembourg		-		-		25		25			-			25		240
Malta		-		2		-		2			-			2		2
Netherlands		8		-		117		125			99			26		404
Portugal		-		-		-		-			-			-		-
Spain		-		-		12		12			12			-		1
Total Eurozone	$	16	$	245	$	3,298	$	3,559		$	3,314		$	245	$	1,754
Czech Republic	$	-	$	-	$	-	$	-		$	-		$	-	$	-
Denmark		-		-		-		-			-			-		10
Norway		-		-		-		-			-			-		217
Russia		-		-		-		-			-			-		-
Sweden		1		-		41		42			41			1		631
Switzerland		-		-		806		806			768			38		447
Turkey		-		-		-		-			-			-		166
United Kingdom		243		8		3,182		3,433			3,160			273		4,274
Total non-Eurozone	$	244	$	8	$	4,029	$	4,281		$	3,969		$	312	$	5,745
Total Europe	$	260	$	253	$	7,327	$	7,840		$	7,283		$	557	$	7,499
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 $1.3 billion (October 31, 2013: $1.4 billion), collateral on repo-style transactions was $6.0 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 July 31, 2014		exposure
Austria	$	-
Belgium		22
Finland		16
France		253
Germany		160
Greece		11
Ireland		27
Italy		47
Luxembourg		79
Malta		-
Netherlands		197
Portugal		-
Spain		104
Total Eurozone	$	916
Denmark	$	11
Norway		3
Sweden		24
Switzerland		1
United Kingdom		254
Total non-Eurozone	$	293
Total exposure	$	1,209
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 $461 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 July 31, 2014			Drawn		Undrawn
Construction program		$	110	$	40
Interim program			6,158		369
Permanent program			282		-
Exposure, net of allowance		$	6,550	$	409
Of the above:
	Net impaired	$	95	$	-
	On credit watch list		132		-
Exposure, net of allowance, as at October 31, 2013		$	5,938	$	467

As at July 31, 2014, the allowance for credit losses for this portfolio was $37 million (October 31, 2013: $55 million). During the quarter and nine months ended July 31, 2014, the provision for credit losses was $2 million and $4 million, respectively ($1 million and $14 million provision for credit losses for the quarter and nine months ended July 31, 2013, respectively).

The business also maintains commercial mortgage-backed securities (CMBS) trading and distribution capabilities. As at July 31, 2014, we have no CMBS inventory (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 July 31, 2014			Drawn		Undrawn
Manufacturing - capital goods		$	197	$	7
Publishing, printing and broadcasting			5		-
Utilities			10		-
Transportation			4		4
Exposure, net of allowance		$	216	$	11
Of the above:
	Net impaired	$	5	$	-
	On credit watch list		174		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 quarter ended January 31, 2014.

As at July 31, 2014, the allowance for credit losses for this portfolio was $36 million (October 31, 2013: $35 million). During the quarter and nine months ended, July 31, 2014, the net reversal of credit losses was nil and $1 million, respectively (provision for credit losses was $14 million and $35 million for the quarter and nine months ended July 31, 2013, respectively).

U.S. leveraged finance
Our drawn exposure, net of allowance, as at July 31, 2014 was $7 million (October 31, 2013: $44 million) and our undrawn exposure was nil (October 31, 2013: $4 million). Our outstanding exposure has declined over the year primarily due to loan sales in the current quarter as well as write-downs in the prior quarter. The remaining outstanding exposure is related to the publishing, printing and broadcasting sector and is on our credit watch list.

As at July 31, 2014, the allowance for credit losses for this portfolio was less than $1 million (October 31, 2013: $2 million). During the quarter ended July 31, 2014, net reversal of credit losses was $4 million and during the nine months ended July 31, 2014, the provision for credit losses was $19 million (net reversal of $1 million and $7 million for the quarter and nine months ended July 31, 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:

$ millions, as at								2014 Jul. 31									2013 Oct. 31
					Subject to market risk									Subject to market risk
		Consolidated balance sheet			Trading			Non- trading	Not subject to market risk		Consolidated balance sheet			Trading			Non- trading	Not subject to market risk		Non-traded risk primary risk sensitivity
Cash and non-interest-bearing deposits with banks		$	2,975	$	-		$	1,545	$	1,430	$	2,211	$	-		$	1,165	$	1,046	Foreign exchange
Interest-bearing deposits with banks			8,217		39			8,178		-		4,168		111			4,057		-	Interest rate
Securities			69,461		47,107	⁽¹⁾		22,354		-		71,984		43,160	⁽¹⁾		28,824		-	Equity, interest rate
Cash collateral on securities borrowed			3,238		-			3,238		-		3,417		-			3,417		-	Interest rate
Securities purchased under resale agreements			25,105		-			25,105		-		25,311		-			25,311		-	Interest rate
Loans
	Residential mortgages		155,013		-			155,013		-		150,938		-			150,938		-	Interest rate
	Personal		35,096		-			35,096		-		34,441		-			34,441		-	Interest rate
	Credit card		11,577		-			11,577		-		14,772		-			14,772		-	Interest rate
	Business and government		54,232		4,680	⁽²⁾		49,552		-		48,207		2,148	⁽²⁾		46,059		-	Interest rate
	Allowance for credit losses		(1,703)		-			(1,703)		-		(1,698)		-			(1,698)		-	Interest rate
Derivative instruments			18,227		15,659	⁽³⁾		2,568		-		19,947		17,626	⁽³⁾		2,321		-	Interest rate,
																				foreign exchange
Customers' liability under acceptances			8,274		-			8,274		-		9,720		-			9,720		-	Interest rate
Other assets			15,710		1,648			7,116		6,946		14,588		1,226			6,537		6,825	Interest rate, equity,
																				foreign exchange
		$	405,422	$	69,133		$	327,913	$	8,376	$	398,006	$	64,271		$	325,864	$	7,871
Deposits		$	322,314	$	498	⁽⁴⁾	$	287,169	$	34,647	$	315,164	$	388	⁽⁴⁾	$	281,027	$	33,749	Interest rate
Obligations related to securities sold short			12,803		12,372			431		-		13,327		13,144			183		-	Interest rate
Cash collateral on securities lent			1,359		-			1,359		-		2,099		-			2,099		-	Interest rate
Obligations related to securities sold under repurchase agreements			9,437		-			9,437		-		4,887		-			4,887		-	Interest rate
Derivative instruments			17,957		16,267	⁽³⁾		1,690		-		19,724		18,220	⁽³⁾		1,504		-	Interest rate,
																				foreign exchange
Acceptances			8,274		-			8,274		-		9,721		-			9,721		-	Interest rate
Other liabilities			10,579		902			4,114		5,563		10,862		872			4,143		5,847	Interest rate
Subordinated indebtedness			4,187		-			4,187		-		4,228		-			4,228		-	Interest rate
		$	386,910	$	30,039		$	316,661	$	40,210	$	380,012	$	32,624		$	307,792	$	39,596

(1)		Excludes structured credit run-off business of $786 million (October 31, 2013: $837 million). These are considered non-trading for market risk purposes.
(2)		Excludes $282 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 quarter ended April 30, 2014, 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 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 July 31, 2014 was down 9% from the prior quarter, primarily due to decreases in our interest rate, credit spread, equity and commodity risks.

Average total stressed VaR for the three months ended July 31, 2014 was down 14% from the prior quarter. During the current stressed VaR period from September 8, 2008 to September 4, 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 IRC for the three months ended July 31, 2014 was up 1% from the prior quarter, mainly due to an increase 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 nine months ended
$ millions						2014 Jul. 31			⁽¹⁾		2014 Apr. 30			⁽¹⁾		2013 Jul. 31			2014 Jul. 31		⁽¹⁾	2013 Jul. 31
		High		Low		As at	Average				As at	Average				As at	Average		Average			Average
Interest rate risk	$	3.4	$	1.2	$	1.2	$	2.0		$	3.8	$	2.7		$	1.7	$	2.2	$	2.0		$	3.0
Credit spread risk		1.9		1.3		1.4		1.6			1.7		1.9			1.2		1.2		1.5			1.5
Equity risk		2.4		1.3		2.4		1.7			1.6		1.8			1.9		2.2		2.0			2.1
Foreign exchange risk		1.7		0.4		0.8		0.9			0.8		0.9			0.8		0.6		0.8			0.7
Commodity risk		1.4		0.6		0.9		1.0			1.1		1.3			1.0		1.5		1.1			1.2
Debt specific risk		3.0		1.9		2.4		2.4			2.3		2.4			1.7		2.0		2.4			2.3
Diversification effect⁽²⁾		n/m		n/m		(6.0)		(6.5)			(7.3)		(7.6)			(4.6)		(5.4)		(6.2)			(6.0)
Total VaR (one-day measure)	$	4.2	$	2.2	$	3.1	$	3.1		$	4.0	$	3.4		$	3.7	$	4.3	$	3.6		$	4.8

(1)

Beginning in the quarter ended April 30, 2014, we 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 nine
months ended

$ millions

2014
Jul. 31

⁽¹⁾

2014
Apr. 30

⁽¹⁾

2013
Jul. 31

2014
Jul. 31

⁽¹⁾

2013
Jul. 31

High

Low

As at

Average

As at

Average

As at

Average

Average

Average

Interest rate risk

9.2

3.5

5.2

6.1

7.3

6.7

4.8

7.4

6.6

8.6

Credit spread risk

12.2

6.4

12.2

8.2

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