Shareholders pass ‘say on pay’

CIBC (TSX:CM) shareholders approved Thursday the way the bank compensates its CEO and top executives, marking the first such “say on pay” vote at one of Canada’s big banks.

MONTREAL — CIBC (TSX:CM) shareholders approved Thursday the way the bank compensates its CEO and top executives, marking the first such “say on pay” vote at one of Canada’s big banks.

The non-binding vote at CIBC’s annual meeting was passed with an overwhelming 92.89 per cent approval, as the bank reported a $652-million profit in the first quarter.

CIBC chairman Charles Sirois told shareholders the bank has reduced executive pay and the potential for “swings” in compensation.

“Overall, we have reduced the range of pay for CIBC’s senior executives, as well as the potential for significant swings in compensation payouts from one year to the next,” Sirois told shareholders.

He also said the approach responds to investors’ demands for incentives that reward performance without encouraging undue risk taking.

“Above all, we believe this approach is right for CIBC given our risk appetite and the priority we place on the consistency and sustainability of our earnings,” he said.

CIBC, the first of the big Canadian banks to report quarterly earnings, said it earned $1.58 per share for the quarter ended Jan. 31, up from $147 million or 29 cents per share a year earlier.

Revenue rose to $3.06 billion, up from $2.02 billion in the first quarter of the ban’s 2008 financial year.

“In sum, 2009 was a productive year for CIBC, as we built a stronger foundation for future growth and opportunity,” president and chief executive Gerry McCaughey told shareholders.

McCaughey said CIBC has demonstrated it can grow through minority investments, partnerships and joint ventures, such as President’s Choice Financial and FirstLine Mortages and First Caribbean.

“We will look for additional strategic growth opportunities, like these, both at home and abroad.”

Loan-loss provisions, the amount banks set aside to deal with money they may lose on loans that aren’t repaid in full, rose to $365 million from $278 million a year ago mostly on higher writeoffs and bankruptcies in its credit cards, and also losses at First Caribbean International Bank.

The provisions were lower, however, compared with the quarter ended Oct. 31, when CIBC set aside $424 million.

In its capital markets division, the bank reported that trading revenue grew six per cent to $277 million.

“We fully expect CIBC’s valuation to benefit significantly from what are admittedly very strong results,” said Barclays Capital analyst John Aiken in a note to clients after the bank’s announcement.

“Further, we believe that the market will — quite rightfully —extrapolate these positive results to the other banks and generate a lift to the sector as positive credit and net interest income stories are likely transferable.”

“That said, we have seen in recent quarters that early positive results have not necessarily been replicated by each bank that subsequently reports,” Aiken said.

CIBC stock closed at $69.82, up $2 or three per cent, Thursday on the Toronto Stock Exchange with almost 2.9 million shares traded.

The rest of Canada’s big banks are also expected to hold shareholder votes on executive compensation over the next few weeks. While the votes are not binding, all have pledged to abide by them.

The votes stem from shareholder discontent over top executives receiving millions of dollars despite poor results.

CIBC had earlier disclosed that McCaughey took a 24 per cent pay cut last year, earning $6.24 million in 2009, down from $8.16 million in 2008. However, McCaughey was also paid a higher base salary of $1.5 million, up from $1 million.

In other developments, former Manulife Financial CEO Dominic D’Alessandro was voted a new member of the CIBC board on Thursday.

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