Top takeaways from RBC’s bank CEO conference

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Banks

RBC Capital Markets held a conference featuring the major domestic bank CEOs. Equity analyst Darko Mihelic summarized the highlights,

“Loan Growth: We continue to expect a relatively low loan growth environment in 2026, although the Canadian banks generally viewed the Canadian economic environment as better than 3 months ago/last year. Some banks expected improvements in H2/26 into 2027. We continue to view the outcome of the CUSMA/USMCA negotiations as a key variable for economic growth in North America. Net interest margins (NIMs): The Canadian bank CEOs generally expected some revenue tailwinds from interest rates … and expanding mortgage spreads (as mortgages roll on at higher rates than roll-off rates). The Canadian banks also expected better deposit mix … and improved asset yields to support NIM stability. Capital Markets: The Canadian banks generally had a constructive view on capital markets in 2026, and many CEOs commented that they were seeing the momentum in 2025 continue into Q1/26. Capital: We believe the Canadian banks’ commentary suggested that capital deployment in the immediate future would be organic with not a lot of appetite for inorganic deployment. Relative to past years, we sensed this year, this message was a little more emphatic. Cost: The Canadian banks mostly emphasized efficiency and cost control through strategic investments in technology and/or AI. TD reiterated its focus on structural cost management which was previously outlined at its Investor Day in September 2025”

Mr. Mihelic has “outperform” ratings on Canadian Imperial Bank of Commerce (CM-T) and Toronto-Dominion Bank (TD-T).

Dollar woes

BofA Securities FX analyst Howard Du noted the collapse in short trades on the Canadian dollar,

“Theme: USD/CAD is close to fair value after sharp depreciation in Dec ‘25 After a third consecutive month of solid labor report, the persistently positive economic data surprise in Canada finally cracked the short CAD speculative positioning. US-CA rate [government bond yield] differential narrowed, leading to a USD/CAD decline from a high of 1.41 [U$0.7092] in November to a low of 1.36 [UU$0.7353] in December. We hold a more neutral USD/CAD view for the near-term. Current level of spot price close to fair value, so CAD is no longer cheap. We also believe rates market is premature to price-in a full BoC rate hike for 2026. Inflation upside risk is elusive in Canada. While recent economic data have been surprising to the upside, growth is more on track to close out the negative output gap, rather than overheating. While a broad-based USD sell off could still drag USD/CAD lower, gradual pricing out of BoC rate hike should also weigh on CAD, in our view. We believe the pair is more likely to see a backloaded depreciation in 2026, after the USMCA renegotiation process culminates. Forecast: expect more backloaded USD/CAD depreciation in 2026 We keep our forecast at 1.38 [U$0.7246] for first half of the year and see the pair falling again to 1.36 [U$0.7353] for 2026 year-end.”

Real estate troubles

BMO senior economist Robert Kavcic detailed the mediocre Toronto real estate market,

“Toronto home sales were down 8.9 per cent year-over-year in December, closing out a very subdued year. Those eagerly awaiting a rebound in volumes and prices on the back of BoC rate cuts were sorely disappointed. The reality is that most of the intense demand pressure is gone, be it from demographics or the rabid FOMO appetite. What the market is left with is good ol’ income, rent and interest rate fundamentals…and they still don’t argue for a sharp acceleration in prices. Indeed, prices were down 6.3 per cent year-over-year in December, continuing their gradual month-to-month downward path. What does 2026 have in store? Maybe some gradual tightening of conditions, but generally more of the same…”

Bluesky post of the day

Diversion

“A Few Things I’m Pretty Sure About” – (Housel) Collaborative Fund