Canadian Imperial Bank of Commerce (CM)

As the US goes, so does Canada. The Canadian economy is largely dependent on exports to the US. With the US consumer buying less basic materials and natural resources, the Canadian economy is suffering. Unemployment jumped to 7.2% in January of 2009. With more layoffs and poorer output, small business and individuals will default on loans and mortgages. CIBC stands to loose more money than the 0.85% of loan value it put aside.

Canadian Imperial Bank of Commerce will likely write off a further $1-billion or more in its current quarter as a result of its exposure to bond insurers, analysts say.

Late Friday , June 19th , Moody's Investor Services downgraded XL Capital Assurance, a subsidiary of Bermuda-based bond insurer Security Capital Assurance Ltd., because of financial struggles and further problems in its mortgage portfolio.

In a note to clients Monday, Blackmont Capital Inc. analyst Brad Smith said he expects CIBC will now write off its remaining exposure to XL Capital Assurance, amounting to a $1-billion pre-tax hit for the third quarter.

XL Capital is one of the bond insurers to which CIBC is exposed because XL provides the guarantee on some investments the bank holds.

CIBC would still have $3.3-billion in exposure to Security Capital, Mr. Smith added.

CIBC posted a $1.11-billion loss in the second quarter because of nearly $2.5-billion in charges, mostly related to its exposure to bond insurers and the U.S. subprime mortgage market.

The charges were higher than many analysts expected, but some took comfort in the fact that the bank was writing down a larger amount of its exposure.