TORONTO

CIBC posted a $71 million profit in the third quarter and managed to both disappoint and please analysts who had expected deeper writedowns but higher earnings.

The bank's earnings amounted to 11 cents per share in the quarter ended July 31, 2008, down from $835 million or $2.31 per share a year ago as both consumer and investment banking turned out weaker results.

The quarterly results included an $885 million charge from risky securities linked to the U.S. residential mortgage market, bad-debt protection purchased from ACA Financial Guaranty Corp. and other U.S. bond insurers who have since been hit by financial problems.

Cash earnings per share were 13 cents, compared with $2.34 a year ago.

The company's stock, however, ended the day five per cent higher, up $3.04 to $60.10 on the Toronto Stock Exchange -- still well off a 52-week peak of $103.64. The spark in its stock left some analysts questioning whether this isn't just a temporary spurt of optimism.

"I think the view is that it seems less likely CIBC is going to have to issue equity,'' said Mario Mendonca an analyst at Genuity Capital Markets. CIBC has already raised $2.9 billion in equity this year.

"Where I disagree is the notion that the (subprime) charges are declining.''

Mendonca noted that while the bank's writedowns didn't include any subprime charges this quarter, it doesn't mean further subprime writedowns aren't headed its way.

"The reason they're not taking subprime charges this quarter is because credit spreads declined,'' he said.

CIBC's credit card portfolio also reported higher than expected credit losses.