CIBC leads the way in Canada, with a large writedown, between $300M, and $500M, and so as predicted a couple of months back the Canadian Banks are all announcing or expected to announce losses associated with the US sub-prime crisis. The exception is TD Bank.
Investors now know size of write-down at Canadian Imperial Bank of Commerce on US subprime exposure, and can pretty much assume Toronto-Dominion Bank doesn’t have any. Both banks announced Visa restructuring gains, with CM noting they’ll cover the CDO hit. But jury still out on Royal Bank of Canada, Bank of Montreal and Bank of Nova Scotia. Genuity Capital Markets says BMO likely to take charge on asset-backed CP exposure, and if it does, others will probably do the same. There’s also likely to be trading losses, even at CM, which left open question of health of credit trading derivative portfolio.
…The market has remained quite focused on CIBC’s holdings of CDOs. So
are we. What does give us some comfort, however, is the fact that we
believe we can size the problem—the bank has $1.7 billion of exposure,
partially mitigated by $300 million of subprime index hedges. So far,
writedowns (inclusive of our estimates in the second quarter) are above
$600 million. The bank will be carrying the CDO position at 60% of cost.
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