The Canadian Imperial Bank of Commerce will be making job cuts in the coming months as the lender seeks to rein in expenses and continue to improve its efficiency, according to a memo obtained by the Financial Post.
CIBC president and chief executive Victor Dodig said in the memo that while the Toronto-based bank has made progress in improving a key efficiency ratio, there is more that needs to be done.
“To support this effort, we are continuing to identify opportunities to simplify our bank and work differently,” Dodig wrote. “This includes reviewing our team to ensure that we are structured to maximize the capabilities of our team, streamline decision-making and further enhance our ability to execute our strategy and priorities. As a result, some team members will be leaving our bank in the coming months.”
Dodig said these decisions were not being taken lightly, but he had signalled such a move could be possible earlier this month when he told a bank CEO conference the only way for the lender to deliver strong financial performance would be to continue to “transform” costs.
CIBC booked $134 million in restructuring charges in 2016, something Dodig suggested at the conference that the bank could do again if it made sense.
But with the current economic cycle continuing to grow older, CIBC has not been the only big Canadian bank that has recently shown interest in controlling costs — or a willingness to lay people off to do so.
Royal Bank of Canada, for instance, reported $113 million in severance and related costs for its fourth quarter that were tied to a “repositioning” of its investor and treasury services business.
Toronto-Dominion Bank likewise took a $154-million restructuring hit in the same quarter, while Bank of Montreal booked a $484-million charge for the three months ended Oct. 31 that it said would affect five per cent of its workforce.
Our focus on becoming a simpler and more efficient bank is consistent with the broader financial services sector
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Victor Dodig, CEO, CIBC
Dodig noted in his memo that they were seeing their competition try to lower their efficiency ratios.
“Our focus on becoming a simpler and more efficient bank is consistent with the broader financial services sector,” he wrote.
Dodig pointed to his bank’s adjusted efficiency ratio of non-interest expenses (such as salaries and IT costs) to total revenue, which the lender had driven down to 55.5 per cent at the end of its fiscal 2019 from 60.4 per cent in 2015.
“While we have made steady progress since we started this journey, we have work to do to lower this ratio further, as it’s part of what makes us a strong competitor in the market and a good long-term investment for our shareholders,” he wrote.