CIBC expects to continue with Aeroplan after 2020 if Aimia deal closes: CEO

TORONTO — Canadian Imperial Bank of Commerce expects to continue as an Aeroplan points partner after 2020, even though its own Aventura loyalty program is growing well, CIBC chief executive Victor Dodig told analysts Thursday.

CIBC is a member of an Air Canada-led consortium that reached a tentative agreement this week to acquire Aeroplan by paying $450 million to Aimia Inc. and assuming $1.9 billion in points liabilities.

The future of Aeroplan has faced questions since Air Canada announced last year that it planned to launch its own loyalty rewards plan in July 2020, when its partnership with Aimia expires.

Asked by an analyst whether CIBC would continue to be an Aeroplan partner after 2020, Dodig replied: “I think so. Absolutely.”

“In the end, our clients hold a lot of these loyalty points,” he said.

Dodig made the comments as the big Canadian lender reported its third-quarter profit grew compared with a year ago and raised its quarterly dividend by three cents to $1.36 per share.

CIBC said its third-quarter profit totalled $1.37 billion, or $3.01 per diluted share, for the three months ended July 31. That was up from a profit of $1.1 billion or $2.60 per share a year earlier and above analyst estimates.

On an adjusted basis, CIBC says it earned $3.08 per diluted share for the quarter, up from an adjusted profit of $2.77 per diluted share in the same quarter last year.

Analysts on average had expected a profit of $2.94 per share for the quarter, according to Thomson Reuters Eikon.

Dodig said he believes CIBC’s focus on relationships with clients is helping the bank’s share price, earnings growth profile and the earnings diversification.

“That includes this deal with Aimia and the consortium,” Dodig said.

CIBC had been Aeroplan’s main credit card partner until 2013, when Toronto-Dominion Bank took over about half of the program’s portfolio. CIBC set up Aventura at the time, but retained about half of its Aeroplan clients.

There are still details to be worked out among members of the consortium, which includes TD and Visa Canada, but Dodig said CIBC is comfortable with the economics and believes that the capital impact is “small and manageable.”

Dodig said the bank delivered solid performance across all of its businesses in the third quarter.

Canadian personal and small business banking group earned $639 million in the quarter, up 14 per cent compared with the same quarter last year. Canadian commercial banking and wealth management earned $350 million, 20 per cent compared with a year ago.

Meanwhile, U.S. commercial banking and wealth management earned $162 million, up $121 million compared with year ago, boosted by its acquisition of PrivateBancorp. 

CIBC’s capital markets business earned $265 million for the third quarter, up five per cent from the same quarter last year.

CIBC’s provision for bad loans totalled $241 million, up $32 million from the third quarter last year.

The bank’s common equity tier 1 ratio or CET1 — a key measure of financial health — was 11.3 per cent compared with 10.4 per cent a year ago.

Companies in this story: (TSX:CM, TSX:AC, TSX:TD, TSX:AIM)

Davd Paddon, The Canadian Press