Big Six Banks Face High Expectations as Earnings Season Heats Up

Canada's big banks are expected to report strong third-quarter earnings this week, but investors are cautious that any missteps could lead to volatility in their high-flying shares. The major lenders have navigated a challenging economic landscape, including weak growth and a sluggish housing market recovery, with relative ease.

Brian Madden, chief investment officer at First Avenue Investment Counsel, notes that the biggest risk is not what the actual results are, but whether the bar has been set too high. He expects the midpoint of annual earnings growth for the Big Six to come in at around 13%.

Madden believes the banks have dealt with the economic situation exceptionally well, with credit loss provisions peaking and now coming down as a percentage of average loans. Growth in the Canadian economy has been mixed, but inflation is creeping up towards the Bank of Canada's target range.