Toronto’s simple marching orders for PrivateBank’s Richman: Grow – Finance News

on Jun23

23 June 2017 | 11:15 am

The $5 billion buyout of PrivateBancorp is finally in the bag. Now get to work.

Larry Richman, the PrivateBancorp CEO who sold the Chicago-based bank he runs to Toronto-based CIBC after two bid sweeteners along the way, now will be expected to pick up the pace on PrivateBank’s already impressive growth rate.

The two banks announced the closing of the deal today.

In an interview with Richman and CIBC CEO Victor Dodig, Dodig said the acquisition of the Chicago-based bank is just the first step in a plan to make the U.S. a meaningful contributor to the smallest of Canada’s Big Five banks.

At PrivateBank’s current earnings level, the U.S. will contribute about 10 percent of CIBC’s earnings this year (CIBC does already own some smaller U.S. businesses). Between five and ten years from now, the goal is for the U.S. to provide a quarter of CIBC’s profits, Dodig said.

CIBC’s earnings in the fiscal year that ended Oct. 31, 2016, were Canadian $4.28 billion, which translates right now into U.S. $3.25 billion. PrivateBancorp’s 2016 earnings were $208 million.

“I think our growth ambitions are significant but achievable,” Dodig said.

Richman’s employment contract as head of CIBC’s U.S. business runs for three years. After that, he’s slated to become executive chairman of the business for another two.

In the interview, Richman and Dodig said those terms aren’t written in stone, suggesting it was possible Richman could stay longer if both sides so desired.

But, if so, Richman will need to oversee the integration of additional acquisitions because Dodig acknowledged there’s no way for the U.S. to contribute 25 percent of earnings without them. That’s never been a long suit of Richman’s, who’s spent his long career as a Chicago banker growing the old-fashioned way—through the painstaking care and feeding of commercial clients and prospects.

In the short term, that’s exactly what Dodig wants Richman and his more than 100 business bankers to do. He said he’ll also leave it to Richman and crew to decide which markets outside of Chicago in which to open or maintain lending offices.

“Larry is going to lead the U.S. business,” Dodig said. “And they’re best placed to say these are the markets where we want to serve our clients and create value for our shareholders.”

In the short term, CIBC’s acquisition agenda in the U.S. will focus more on wealth management firms than on other banks, Dodig said. But other banks will be targets further out to gain deposits to fund loan growth.

There are government limits to how much Canadian banks can funnel deposits north of the border to U.S. borrowers. And PrivateBancorp’s deposit base is overwhelmingly commercial in nature, with very large corporate depositors accounting for an unusually large share.

Said Richman: “We’ve got a lot of opportunities to continue to do what we’re doing. … We’ve got a lot to do.”



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