The Canadian Imperial Bank of Commerce saw higher revenue across most of its business lines and beat analyst expectations in the first quarter but posted a drop in net income on higher loan-loss provisions and a one-off charge to settle a lawsuit.

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The bank reported net income of $432 million, down 77 per cent from $1.87-billion, or $2.01 per share, a year ago for the three-month period ended Jan. 31.

On an adjusted basis that excluded items such as the lawsuit settlement and a post-pandemic excess-profit tax imposed by the federal government, the bank said it earned $1.84 billion, down three per cent from the same quarter a year ago, or $1.94 per share, well ahead of Bloomberg analyst expectations of $1.72 per share. Analysts attributed the beat to strong results from the bank’s capital markets segment and overall revenue growth.

Capital markets profit rose 13 per cent year-over-year to $612 million despite significant market volatility.

CIBC’s core Canadian banking business, meanwhile, saw profit slip 14 per cent to $589 million in the first quarter.

While loan growth checked in at 10 per cent, including 14 per cent for commercial loans, the bank’s credit-loss provisions grew to $295 million, up $220 million from the same time last year.

Net income from the Canadian commercial and wealth management segment climbed two per cent to $469 million, driven by rising interest rates and higher commercial banking volumes.

In the United States, CIBC’s banking and wealth management profit slipped by $25 million to $201 million as expenses and provisions for credit losses mounted. Last year, the bank had emphasized its operations south of the border in the hopes of generating double-digit revenue growth over the next few years. Total revenue in this segment grew to $706 million in the first quarter from $653 million during the fourth quarter last year.

“Amid continued central bank tightening and geopolitical tensions, we had a good start to the year, growing revenue and growing pre-provision, pre-tax earnings to record levels,” CIBC chief executive Victor Dodig said during the conference call following the results.

“We’ve exhibited our resilience in difficult times in the recent past, and we’re confident in our ability to navigate the current economic environment,” he added.

During the conference call, executives said the bank was also hit with an income tax charge with an after-tax cost of $545-million stemming from the federal government’s bid to tax excess profits on financial services companies laid out in the 2022 budget. The federal government’s one-time, 15 per cent banking and life insurer tax was based on the average of 2020 and 2021 taxable income exceeding $1 billion.

The bank also took $1.169 billion in legal provisions after losing a court battle with Cerberus Capital Management L.P., which had accused CIBC of defaulting on certain payments tied to a limited recourse note dating back to the Financial Crisis. The bank initially planned to appeal the decision but last week said it had agreed to pay US$770 million to settle all claims, less than the amount awarded by the court.

John Aiken, senior analyst and head of research at Barclays Bank PLC, said the results marked a “strong headline beat,” but didn’t expect much of a reaction from investors.

“We anticipate that the market is likely to temper its enthusiasm to a certain degree as the better-than-expected results were led by exceptionally strong trading revenues and lower-than-forecast provisions,” he wrote in a Feb. 24 note.

Aiken added that CIBC’s sequential lending growth slowed to less than one per cent across each of the segments and that it had an 11 per cent increase in impaired loans largely due to the real estate downturn, which could weigh on the bank’s outlook and be a harbinger of trouble on the credit front when other banks report this quarter.

Shares of CIBC rose over one per cent and were trading at $61.98 shortly after 12 p.m. Toronto time.

• Email: shughes@postmedia.com | Twitter: StephHughes95