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Why CIBC’s Mortgage Growth Has Stalled

CIBC-MortgagesThe Financial Post ran a story this week suggesting that CIBC is retreating from consumer lending due to risk concerns. That was likely a stretch.

The article was based primarily on one data point, percentage change in mortgage and household lending.

Since CIBC has near-0% volume growth in the first five months of 2012—whereas the other Big 6 banks are at ~2% or more—it’s implied that CIBC doesn’t like the consumer lending space.

If you’ve listened to CIBC’s quarterly conference calls, that doesn’t add up. CIBC has never expressed concerns about mortgage lending in general. It simply wants to shrink what it deems insufficiently-profitable mortgage lending.

Specifically, CIBC wants to refocus from brokered mortgages to mortgages originated through its branches and Mobile Mortgage Advisors. The bank has invested heavily to build those latter channels.

According to a good source at the bank, the closure of its FirstLine mortgage division is the #1 reason why CIBC’s mortgage growth has dropped. That is intentional. The bank is in the process of retooling its mortgage business to ramp up retail distribution, and it’s going to take time.

(Whether that strategy pays off is an entirely different story. More on that here: CIBC’s Mortgage Gamble.)

There may be secondary factors at play as well. We’ve heard some say that CIBC wants to focus more on wealth management, for example. But there’s little evidence to suggest that CIBC’s flat mortgage volumes are an indictment of the housing market.

Robert McLister, CMT