From the document attach please answer point number 6. "Metrics for tracking program performance"

Thanks

1. Problem Framing:

In 2020, according to bank report earnings, the adjusted basis was $ 3.8 billion or $ 4.4 billion falling 26% and 18% respectively from last year. This is the main result of the economic effect of the COVID-19 pandemic whereas the capital position of CIBC was very strong with a 12% ratio which has an impact on the strength of their balance sheet but the team of CIBC bank tries to do their best to grow their business in an undetermined economic environment. (Dodig,2020). COVID-19 which occurred in the first quarter of 2020 showed a great shock to the principal markets of CIBC. Travel restrictions and physical distancing became the main reasons for the steep decline in the economy. The CIBCs net income was also affected like non-interest expenses were inclined by $ 797 million and income taxes declined by $ 142 million which represents that net income decreased by $655 million as compared to 2019 it declined $ 323 million. $ 248 million which is related to controlling interest in CIBC was determined $ 28 million in the second quarter of 2020 and in the fourth quarter, it showed $ 220 million.

CIBC had a loss in 2020 as compared to 2019 as $ 363 million or 5% non-interest income from 2019 and there was a decrease in payment and deposit fees due to less client transaction activity bank. Due to the rise in commercial loans, $ 62 million growth in credit fees. Lower transaction activity impact on card fees which declined 10% and custodial fees 6% (Dodig,2020). Total indirect taxes and income taxes of CIBC fell $ 229 million from 2019.

CIBC has faced a wide range of risks in all parts of the business. After determining and understanding all risks and their effect, CIBC bank can frame its management practices. It is considered that there is a strong risk in culture and communication between the main three lines of defense are essential characteristics of CIBCs effective risk management. The substantial amount of CIBC business which includes extending credit and offering financial sources to companies, industries, individuals, or governments is likely affected by COVID-19, obstructing their ability to fulfill original loans and affecting the capacity to repay their loans.

Net interest income is slightly affected by the interest rates of the market. The COVID-19 pandemic has increased operational risks and pressure for CIBC in the case of business fraud, transaction of processing, management of third-party, cyber security, and interruption. There was a historic growth of debts level which was determined in 2017-2018 was primarily decreased by debt of higher mortgage had been tempered by the bank of CIBC.

To combine with the previous less unemployment environment, it measures that they have intended to affect the ratio of debt in 2018 to 2019. The bank of Canada ( CIBC) has cut interest rates and offered some temporary relief programs across all the products of retail. There is a significant loss for portfolios of mortgages that remain low. Due to the pandemic, CIBC started using innovative technologies like the Internet to expand its consumers experience. At this time, it has increased the threats of cyber, interruption of business and financial risks have also risen. The risk of credit also arose out of the lending businesses in CIBC. The credit cards have a lower interest rate of 10.99% which was offered, in addition to the choice to defer credit card payments up to four months with a low-interest rate as well as the mortgages of residency and regular mortgages also deferred for up to six months.

3. Alternative solution for the identified problem.

The given problem has a major impact on the CIBC bank especially in 2020 during the pandemic however, to overcome this problem it is always better to find an alternative solution. Therefore, CIBC bank has also found the alternative solution to its problem and to improve it which are as follows:

1. Calculating the efficiency ratio: The efficiency ratio of CIBC bank were went down from 60.6% to 55.8% in 2020 as they were reported that the bank will be had an efficiency ratio of 60.6% but they end up getting 55.8% (2020 Annual report-CIBC). Therefore, they had to figure it out and adjust the reported ratio and the revenues in order to calculate the efficiency ratio of the bank.
2. Adjustment in operational leverage: Operating leverage means that the cost to calculate the degree of an ongoing firm or the company so that incline in operating income and give a reason to increase its revenue too. The reported operating leverage was 4.0% however, in the pandemic year 2020 by doing the calculation the CIBC bank adjusted the operating leverage to 0.6% (2020 Annual report-CIBC). The company had to adjust the report and they had to eliminate the expenses in terms of adjusting the operational leverage.
3. Adjusting the dividends: the company before the pandemic decides to set the ratio for dividend payout which was between 40-50%. However, the reported dividends payout out was 70% while the adjustment in dividend payout was 60% (2020 Annual report-CIBC). Therefore, the company had to adjust and make up the calculations by reviewing the net income statement to eliminate its impact.
4. Reconciliation on returning the common equity of shareholders: The bank was trying to calculate the net income so the bank could try to make a profit by comparing the reporting and adjusted ROE in 2020. The reported ROE was 10% but they try to adjust ROE to 11.7% which was good for their profitability.
5. Effectively adjusting the tax rates: The bank was trying to adjust the tax rates by looking into the previous years to tax reports and also the before income tax and after the income tax to see where they were lacking to eliminate the risk and problems so that they could manage and properly calculate the tax rates. Thus, these were the measures that were taken to solve any kind of problem that was happened in the pandemic so that they could able to perform smoothly as they were doing earlier.

4. Analysis of Alternatives

1. Calculating the efficiency ratio: The efficiency ratio for banks is important because it shows how much of the revenue that the bank makes will be available for loans in the future as well as loan loss provisions. It is also important for paying the taxes. The lower the efficiency ratio the better because it shows that the bank is spending less money to make money. In 2020 CIBC had an efficiency ratio of 55.8% which is little on the higher side since the optimal efficiency ratio is 50%. This is a problem because the efficiency ratio tells you how profitable a bank is so CIBC not being on the optimal side of efficiency ratio shows that the clients will trust CIBC less with their money and most likely not go with them for anything.

2. Adjustment in operational leverage: Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue. As stated previously the adjusted operating leverage for CIBC is 0.6%. The lower the operating leverage percent the better because it shows that CIBC is getting a good value for the costs that they are incurring. This is good that CIBC went down from 4.0% to 0.6% so it shows that CIBC is doing a great job of making money for the costs that they are incurring

3. Adjusting the dividends: CIBC as stated before originally wanted to payout 40-50% in dividends but ultimately at the end of 2020 it had given out 70% of dividend payout and after the adjustment in turned out to be 60%. In terms of giving out higher percentage of dividends it usually means the bank had an increase in improved cash flows which can means the bank is performing well. But in CIBCs case it is believed that they dont have any growth opportunities probably the reason of not having operational leverage as well as the efficiency ratio and due to that dont have any growth opportunities as is not considered a worthwhile bank to invest by clients so thats the reason of just not investing and just giving out the extra cash flow to shareholders in the way of dividends.

4. Reconciliation on returning the common equity of shareholders: ROE is a measure of financial performance calculated by dividing net income by shareholders equity. A good ROE measurement for the banks is considered 11%-15%. CIBC bank has a ROE rate of 10% and an adjusted ROE is 11.7%. CIBC bank is in between the threshold so that is a great sign for CIBC. This shows that CIBC is doing a great job by generating profits from money that owners or shareholders have invested on. In CIBC case it might mean the dividend that was paid off to shareholders which could have helped with the ROE so while it is important to have great ROE. It is not always a sign that the company is doing well.

5. Effectively adjusting the tax rates: CIBC has deep dived in 2020 to previous income taxes to figure out how to reduce their tax rates. They are a number of ways that CIBC can tackle to reduce their income tax that they will be paying for the government. The way that they can reduce it is that they could use the income to invest in other companies or buy another company, merge with another company or any other outside investments that can divert the net income that CIBC made so that the tax will be lowered, and the money is distributed to a better cause for CIBC.

5. Best strategies and implementation.

CIBC follows the three main strategies to grow their business more all over Canada which will be discussed below in detail:

1. Building a healthy relationship with customers: During the pandemic, the customer and the employees of the bank were facing very problems building and have strong communication. However, letting the employees do work from home and opening the customer service department during the pandemic time was very helpful to satisfy the customer and solve their problems within the given time frame. Moreover, CIBC bank also announced that there are convenient ways that will be provided to all the old clients like business owners, and some other personal clients or the new clients to access mortgage information and its options, regarding the credit history and increasing of the credit card limit and also helping the disabled people. For the safety of customers and clients, there are some protocols which have been added as per the rules and guidelines given by the government.
2. Remedies for market-leading: The bank has been trying to give as many solutions to its customers so that their customers would not be disappointed with its services. Therefore, they bring some remedies for market-leading which was that they will notify and alert their client by notification on their mobile banking apps regarding the low balance left in their checking account. In addition to this, the bank will offer some other kinds of services like giving cashback to its customers from credit cards and reward programs like SPC and perks membership for the students if they are connected with CIBC bank. Besides this, CIBC bank launched their new credit card which is the Aventura Visa Infinite Privilege card which gives a travel premium experience to its clients. By using their credit card, customers can earn Aventura points which can be used in some specific places. Therefore, CIBC bank also tries to attract new customers and give them the opportunity to try out their credit cards with special deals on them.
3. Providing a convenient banking system: The technology has been very advanced nowadays and everyone is well aware of how to efficiently and effectively use the technology. Therefore, CIBC banks provide various mobile banking features that will help people to transfer money to people who are miles away by just sitting in the other corner of the world. Furthermore, people can also easily transfer the money into their savings account or can pay their credit card statement on their own. Moreover, they can find out their direct deposit form, void cheques, and many other things through their banking apps. Therefore, these things make the customer work easier and save their time which is the most priority of the bank, and to satisfy its customer by fulfilling their needs and demands.

6. Metrics for tracking program performance.