The FINANCIAL -- According to Dow Jones, it is "increasingly likely" that Canadian Imperial Bank of Commerce (CM) will take further write-downs related to its U.S. subprime exposure as the outlook for bond insurers deteriorates, the bank said in a regulatory filing.
CIBC has already taken about US$3.2 billion in write-downs on its subprime exposure and warned last week that it could have to take more if the credit status of its financial guarantors deteriorates.
The bank has about US$8.5 billion in hedged exposure to U.S. residential real estate.
In a filing this week, under which CIBC expects to raise C$1.25 billion in equity to bolster its battered coffers, the bank notes that four of the financial guarantors with which it has hedge contract are now under credit watch by credit rating agencies and two are under negative outlook.
"Given recent downgrades of financial guarantors and a deterioration of CIBC's assessment of the current credit status of these financial guarantors, it is increasingly likely that CIBC will increase the fair value adjustments and the amounts of write-downs" related to its U.S. subprime exposure, the bank said.
The bank took a total of US$753 million in pretax charges in 2007 related to its U.S. subprime exposure. Earlier this month, it said it would take US$462 million pretax or US$310 million after-tax write-down for its unhedged exposure.
As well, the bank made a US$2 billion (or US$1.3 billion after-tax) fair value adjustment to its hedged exposure with ACA Financial Guaranty Corp., a U.S. bond insurer that was downgraded to junk status last month. Canadian Imperial noted its net receivable from ACA is now valued at US$70 million.
In the filing, CIBC said it had US$551 million in exposure to one AA-rated financial guarantor that had recently been downgraded by Fitch ratings . The value of the securities hedged by that guarantor has declined by US$217 million since Dec. 31, the bank said.
It didn't name the financial guarantor, and a spokesman for the bank declined comment.
However, only one bond insurer has had its ratings cut. Ambac Financial Group (ABK), was downgraded by Fitch ratings on January 18 to AA from AAA.
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