In June 2006, the Canadian Imperial Bank of Commerce (CIBC) (CM) announced that it had reached a definitive agreement with Barclays Bank PLC (OTCPK:BCLYF) to acquire its 43.7% ownership stake in FirstCaribbean International Bank. The deal was reported to be worth $1.08 billion and would give CIBC majority control at 87.4%. CIBC would go on to acquire 100% of the outstanding shares of the bank. FirstCaribbean was initially established when CIBC and Barclays agreed to merge their Caribbean banking groups. Prior to the start up of FirstCaribbean the operations were run as the separate businesses of Barclays Bank and CIBC West Indies. Barclays had been active in the region since 1837 and CIBC since 1920 through its branch network in Jamaica.
FirstCaribbean is backed by over 3,400 staff, 100 branches and banking centres and offices in 17 countries comprising: Anguilla, Antigua, The Bahamas, Barbados, Belize, The British Virgin Islands, The Cayman Islands, Curacao, Dominica, Grenada, Jamaica, St Kitts & Nevis, St Lucia, St Maarten, St Vincent, Trinidad and Tobago and The Turks and Caicos Islands. The bank has approximately 780,000 active accounts.
CIBC recently announced that it will write-down $420 million in its Caribbean operations. According to various reports CIBC's struggling Caribbean operations continue to struggle, with the lender recording a $420-million after tax goodwill write down.
A write down is reducing the book value of an asset because it is overvalued compared to the market value. A write down typically occurs on a company's financial statement, when the carrying value of the asset can no longer be justified as fair value and it is unlikely that the cost will be recovered.
CIBC called the Caribbean situation very challenging in light that tourism has been hit since the 2008-2009 global financial crisis. Further, loans made to develop new resorts and to fund business expansion have also suffered.
Despite the huge blow to CIBC its stock has not been harmed and in fact it continues to show strength. Should the stock pull back on poor earnings due to the Caribbean issues then this would present a solid buying opportunity to start or increase a position on CIBC.
Disclosure: I am long CM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.