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Noah Zivitz

Managing Editor, BNN Bloomberg

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Canadian Imperial Bank of Commerce joined the parade of profit beats from Canada's Big Six banks, as improved credit quality and top-line growth powered the quarter.

CIBC said Thursday that its net income for the fiscal third quarter, which ended July 31, surged 48 per cent year-over-year to $1.73 billion. Its total revenue rose seven per cent year-over-year to $5.6 billion. On an adjusted basis, the bank earned $3.93 per share; analysts, on average, were expecting $3.41. 

"This quarter's record top-line revenue and earnings per share underscore the breadth and quality of the growth we have across all of our key business units, as we continue to successfully navigate an uncertain environment," said Victor Dodig, CIBC's president and chief executive officer, in a release. 

The lender benefitted from a dramatically improved credit outlook as it released $99 million from funds that had been set aside for bad loans. CIBC had previously added more than $2 billion to its credit loss provisions since the onset of the pandemic to brace itself for the possibility of loan defaults. 

CIBC posted growth in all of its major divisions in the most recent quarter, led by U.S. commercial banking and wealth management, where adjusted profit surged 272 per cent to $279 million. 

Profit in CIBC's core Canadian banking unit rose 40 per cent year-over-year to $642 million, despite an uptick in provisions for credit losses. The unit's revenue climbed above $2 billion as lending activity picked up. Notably, CIBC's Canadian residential mortgage book hit $240.2 billion in the third quarter, compared to $230 billion in the fiscal second quarter. 

The bank's key capital ratio - Common Equity Tier 1 - stood at 12.3 per cent in the quarter, down from 12.4 per cent in its second quarter. All of Canada's banks have seen that important metric rise to historically high levels amid a temporary ban on share buybacks and dividend hikes that was instituted by the country's banking regulator more than a year ago.

On Wednesday, the issue of dividends boiled to the surface in the wake of the Liberal Party of Canada's election campaign pledge to apply a surplus tax on profit above $1 billion at Canada's largest financial institutions. 

"The proposed tax increase would reduce income that would otherwise benefit the majority of Canadians who are bank shareholders,” said the Canadian Bankers Association in response to the Liberals' announcement