Toronto-based Canadian Imperial Bank of Commerce’s (CIBC) latest U.S. acquisition is consistent with the bank’s strategy and will not affect its credit rating, according to credit rating agency DBRS Inc.
CIBC announced today that it is buying Chicago-based PrivateBancorp Inc. for $4.9 billion in cash and stock. The deal is expected to close in the first quarter of 2017, subject to shareholder and regulatory approvals.
Commenting on the deal, Toronto-based DBRS said it views the transaction as “consistent with CIBC’s stated acquisition strategy.”
DBRS said the deal gives CIBC the capability to provide U.S. banking services to clients, including the ability to accept deposits, “which will strengthen ties with current Canadian customers who do business with, or spend time in, the U.S.”Additionally, DBRS said, CIBC will now be able to provide commercial and private banking services to Atlantic Trust, a U.S. wealth-management firm that CIBC acquired in 2013.
“The acquisition brings further revenue and geographic diversification to CIBC,” the rating agency said, “with the U.S. banking business expected to contribute over 10% of CIBC’s total net income over the short-term, while management is targeting a 25% U.S. contribution over the long term.”
Finally, the rating agency said that while CIBC is paying a hefty price, PrivateBancorp “has delivered strong results and has a very sound balance sheet.” It also noted that PrivateBancorp’s loan portfolio is “performing very well and was deeply analyzed by CIBC’s credit team, mitigating this risk.” CIBC’s common-equity tier-one ratio will remain at or above 10% after the deal closes, DBRS said, and management is committed to building this back up.
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