The Big Six banks are forecast to post average earnings growth of about 6 per cent from last year as tariffs and the slowing economy take a toll.MARK BLINCH/Reuters
Canada’s biggest banks head into earnings season well-stocked with capital, but facing the strain of tariffs and a slowing economy.
Analysts say profits are likely to see a modest rise, as steadier loan losses, flat lending margins and softer trading replace the record capital-markets gains that drove results earlier in 2025.
The reports will be dissected for signs of pressure in areas such as loan losses, lending margins and capital-markets revenue as a gauge of both the banks’ resilience and the economy’s direction. Canada’s efforts to blunt the impact of U.S. tariffs have yielded little progress, and analysts warn the uncertainty threatens to slow business investment and weigh on consumer borrowing.
Scotiabank projects the Big Six Canadian banks will post average earnings growth of about 6 per cent from last year. Fitch Ratings reinforced its June downgrade of the sector in a report this week that said the outlook is “deteriorating,” citing tariff risks and weaker business sentiment.
While analysts said banks’ strong capital levels remain a buffer, they warned loan losses could rise again if trade tensions intensify.
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Provisions for credit losses – money banks set aside for loans that could default – are a closely watched measure of financial stress among customers. Market watchers expect these reserves to ease after a tariff-driven spike last quarter, though Fitch cautioned that costs could climb again if trade negotiations falter.
Net interest margins, the spread between what banks earn on loans and pay on deposits such as savings accounts and GICs, are expected to stay flat as the profit boost from the Bank of Canada’s rate-hike spree fades. Bank of Nova Scotia BNS-T said Toronto-Dominion Bank TD-N may be an exception, with a potential profit lift in its U.S. retail arm.
Loan growth is forecast to remain subdued, with Scotiabank estimating average annual growth of about 3 per cent in Canada. Borrowing by households and businesses has slowed as uncertainty over tariffs and higher unemployment weighs on confidence.
The Big Six have reported strong results in their capital-markets businesses to date, with first-half 2025 revenue up 19 per cent year over year. Morningstar DBRS analysts said they expect this momentum to continue in the third quarter as market volatility persists.
In investment banking, where recent growth has been driven by larger merger and acquisition transactions, “the outlook remains highly uncertain in the current challenging operating environment,” the analysts wrote.
National Bank NA-T analyst Gabriel Dechaine said the Big Six bank stocks have outperformed the wider TSX by one percentage point so far this year.
Bank of Montreal BMO-T and Scotiabank will kick off earnings season on Tuesday, followed by National Bank and CIBC CM-T on Wednesday. Royal Bank RY-T and TD report Thursday, with Laurentian Bank LB-T closing the week on Friday.