Canadian Banks Face High Bar for Earnings Amid Challenging Economic Landscape

Canada's major banks are expected to deliver strong earnings when they report third-quarter results this week, but analysts warn that failing to meet high expectations could lead to volatility in their shares.

The big six lenders have navigated a challenging economic landscape, including a shifting tariff environment and weak growth, while maintaining resilience in their shares. Their stock prices have risen sharply, with gains ranging from 20% to 35% year-to-date.

Chief investment officer Brian Madden of First Avenue Investment Counsel expects the midpoint of annual earnings growth for the Big Six to be around 13%, noting that provisions for credit losses are coming down as a percentage of average loans. However, he cautions that 'the biggest risk at a juncture like this isn't so much what the actual results are because they're going to be good and they're going to be record-breaking, but it could be, 'Has the bar been set too high?'

Analysts will closely watch various metrics, including credit losses, fee income, and capital markets performance. Royal Bank of Canada and BMO Financial Group are expected to report their results on Tuesday, followed by National Bank of Canada on Wednesday.