Fitch Affirms Canadian Imperial Bank of Commerce

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NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the long- and short-term Issuer Default Ratings (IDRs) of Canadian Imperial Bank of Commerce (CIBC) at 'AA-/F1+' and the short-term IDR of its subsidiary, Canadian Imperial Holdings, Inc. at 'F1+'. The Rating Outlook remains Stable. A complete list of ratings follows at the end of this release.

The affirmation reflects CIBC's sound overall financial fundamentals. CIBC's ratings also benefit from Canada's comparatively favorable economic environment and a currently stable domestic banking market.

CIBC's results still incorporate items of note, however, their magnitude has declined markedly, leading to reduced volatility in reported results. Profitability has maintained an upward trend in 2011. Sequential results of CIBC, and all the other major Canadian banks, indicate that revenue and earnings growth is showing signs of a slowdown as retail credit growth has started to shift to a lower gear while lending margins continue to shrink. Additionally, decreases in provisioning expenses have ebbed as loan loss provisions are approaching normal levels.

The establishment of the wealth management business unit and the recent acquisition of a 41% stake in American Century Investments (ACI), a U.S. investment management firm, provides earnings diversity and is consistent with the firm's risk appetite and strategic direction.

Asset quality indicators have remained consistent and continue to compare well globally. Having substantially repositioned its wholesale and investment banking business, CIBC's performance is now more closely tied to its domestic customer base than in the past. In this context, CIBC is relatively more exposed to credit deterioration that could result from the rising trend in Canadian household debt.

CIBC has additional risk in foreign portfolios, including the European and U.S. leveraged finance run-off portfolios and the active U.S. real estate business, although outstandings in these portfolios are contained at approximately 1% of total assets. Additionally, CIBC holds its structured credit run-off portfolio at a substantially reduced valuation and has taken meaningful steps to largely neutralize the remaining potential downside risk.

CIBC's liquidity profile benefits from a stable core deposit base and proactive management of its wholesale funding, the vast majority of which is domestic. CIBC, like the other major Canadian banks, has had access to equity markets and to ample unsecured and secured funding without central bank support since the onset of the financial crisis.

CIBC's capital ratios have steadily improved and compare well with domestic and global peers, using Fitch core capital measures. Capitalization also benefits from CIBC's sizeable holdings of government-insured assets. CIBC estimated its Basel III common equity ratio to be 8.1% as of Oct. 31, 2011.

The short-term IDR and debt ratings of Canadian Imperial Holdings, Inc. are linked to those of CIBC as a result of a direct guaranty.

Looking ahead, record levels of consumer indebtedness leave Canadian households much more exposed to an adverse shock than in previous periods. If delinquencies in the domestic retail loan book, including CIBC's sizeable credit card portfolio, increase beyond expectations, the ratings could come under pressure.

Further, erosion of key franchise strengths (e.g. core deposit and customer funding, capital and customer market share, and strong domestic asset quality) would likely result in downward pressure on ratings or a ratings downgrade.

Positive rating momentum is difficult to envision at the present time considering CIBC's current high ratings.

CIBC is one of the five largest Canadian banks, with a nationwide branch footprint and significant market share in most consumer and commercial banking products. CIBC operates three primary strategic business units: retail and business banking, a newly created wealth management unit, and wholesale banking. The corporate and other unit includes functional groups and international banking comprising mainly CIBC FirstCaribbean, the strategic investments in the CIBC Mellon Joint ventures (50/50) and The Bank of N.T. Butterfield & Son Limited (21.5%).

Fitch has affirmed the following ratings with a Stable Outlook:

Canadian Imperial Bank of Commerce

--Long-term Issuer Default Rating (IDR) at 'AA-';

--Viability Rating at 'aa-'

--Short-term IDR at 'F1+';

--Short-term Debt at 'F1+';

--Senior unsecured debt at 'AA-';

--Senior market-linked securities at 'AA-emr';

--Subordinated debt at 'A+';

--Preferred stock at 'A';

--Individual at 'B';

--Support at '1';

--Support floor at 'A-'.

Canadian Imperial Holdings, Inc.

--Short-term debt at 'F1+'.

CIBC Capital Trust

--Preferred stock at 'A'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

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CONTACT:

Fitch Ratings
Brian Bertsch, +1-212-908-0549
Media Relations, New York
brian.bertsch@fitchratings.com
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Primary Analyst:
Fabrice Toka, +1-212-368-0369
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
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Secondary Analyst:
Joe Scott, +1-212-368-0624
Senior Director
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Thomas Abruzzo, +1-212-908-0793
Managing Director