CIBC’s Dodig pushes strategy as fear of recession hits banking sector
Early work to improve CIBC’s customer service included speeding up responses to complaints, as well as recording and sharing customer feedback, Dodig said. The bank has also invested heavily in technology, including cloud and customer relationship software.
Dodig brought the bank back to the U.S. in 2017, buying Chicago-based PrivateBancorp for $5 billion — its largest deal — giving CIBC access to middle-market U.S. businesses, business owners businesses and wealthy families. CIBC last year added a minority stake in Chicago-based Loop Capital for an undisclosed price.
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Dodig argues that CIBC has carved out a niche for itself in what it calls the private economy in the United States, where its commercial banking, capital markets and wealth management units work together to serve the “entrepreneurial class where wealth is created,” he said.
Dodig cited an example: CIBC recently advised the owner of a closely held food company on selling half of his business to a private equity firm, helped finance the deal, and now has his division wealth management company that manages the proceeds for the seller’s family.
“It doesn’t require us to compete with Wall Street,” Dodig said. “It forces us to make the most of our abilities and bring them to the United States with a winning proposition.” Last year, about a fifth of CIBC’s profits were generated in the United States, up from about 2% before the deal with PrivateBancorp.
By other measures, the US strategy appears less impressive. That’s decidedly less lucrative than most of what CIBC does in Canada: the U.S. business and wealth management unit’s return on equity was 10.3% in fiscal 2021 , and before the pandemic, it was between 7% and 8%.
“So the question for Victor is, why grow the US business aggressively by 10% if it’s not as profitable as Canada? RBC Capital Markets analyst Darko Mihelic posed the question to the CEO at Investor Day last week. Dodig responded that CIBC would be “relentless” in its focus on organic growth and that any U.S. acquisition would focus on wealth management, where returns tend to be higher.