The fallout from last week’s mono-line downgrades just hit CIBC right between the eyes. The bank is now poised to take a $1B loss on its third quarter earnings.
Canadian Imperial Bank of Commerce (TSX:CM) is likely to book another $1-billion pretax writedown after Moody’s downgraded monoline insurer XL Capital Assurance to junk, a bank industry watcher said Monday.
“We expect CIBC will write off its remaining fair value exposure to XLCA in its third-quarter 2008 results,” Blackmont Capital analyst Brad Smith wrote in a note.
This comes in addition to the second quarter credit-related hit of $2.5B.
CIBC took a big loss in the second quarter, after taking additional charges of C$2.5 billion for U.S. structured credit securities and other positions hurt by the credit crunch.
If it doesn’t end here, the bank will be next in in the bread line.
…,although the bank could withstand further losses in its subprime portfolio, further losses on higher-rated investments could force CIBC to raise more capital.
But they had better hurry if they choose that route, the over-travelled capital-raising highway is soon to be the road not traveled.
As banks rack up billions of dollars in losses from bad loans and blundered investments, large investors are becoming skittish about pumping more money into them.
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