CIBC buys stake in U.S. wealth firm for $848M US

CIBCsnaggeda 41 per cent piece of U.S.-based American Century Investments for $848 million U.S., the Canadianbank announced Friday.

The Canadian Imperial Bank of Commerce said it purchased the minority stake in the KansasCity. Mo. wealth management firm from JP Morgan Chase & Co. as way of boosting its international business catering to high net-worth individuals.

"This investment will build on our strong franchise in Canada and provide CIBC an additional platform for growth in asset management internationally," said CIBC's president and chief executive officer Gerry McCaughey.

In return, the Canadian bank gets10 per cent of the voting rights in American Century and two seats on its board of directors.

For its part, American Century, which has $112 billion US of assets under management,said it was happy with the sale because the U.S. firm now has a bigger corporate structure to sell its products and services.

"CIBC's large footprint in Canada and presence in other parts of the world will help in the execution of our growth through diversification strategy," said Jonathan Thomas, American Century's president and chief executive officer.

Recent developments

CIBC saw its second net earnings, at $1.46 per-share, jump by 13 per cent versus the same quarter a year earlier but miss analysts' expectations earnings before special items by two pennies.

Recently, Canadian banks have been shunning the U.S. retail banking markets and instead focusing on ways of improving their reach into that country's wealth management business.

In June, the Royal Bank of Canada sold its retail banking business for approximately $3.6 billion US, a move which meant RBC was essentially closing the books on its attempt to get into the American banking market through North Carolina's Centura Bank.

Canada's biggest bank, however, has continued to hold its wealth management arm, Dain Rauscher Inc. out of Minneapolis, Minn.