Canada’s Biggest Banks Report Strong Third Quarter Earnings

Canada’s five biggest banks reported their third-quarter earnings this week, with all of them benefiting from smaller-than-expected provisions as some of the Canada-U.S. trade tensions that pushed lenders to build their reserves eased.

Bank Performance

Bank of Nova Scotia and Bank of Montreal kicked off earnings week on Tuesday, followed by Royal Bank of Canada and National Bank on Wednesday, and Toronto Dominion Bank and Canadian Imperial Bank of Commerce on Thursday. Five out of six banks beat expectations, with only National Bank slightly missing this time, according to Derek Holt, vice-president and head of capital markets economics at Scotiabank.

Trade Deal Uncertainty

The banks had built up reserves during the second quarter in anticipation of a macroeconomic slowdown due to trade tensions, particularly amid U.S. President Donald Trump’s tariff threats. While a trade deal between Canada and the United States has not yet been reached, the outlook has improved considerably since April.

Executives like Kevin Tran of TD Bank and Dave McKay of RBC cautioned that continued uncertainty around a trade deal could slow the economy and lead to higher inflation. CIBC’s chief executive Victor Dodig also expressed concerns about global trade tensions impacting growth and inflation, but noted that declining interest rates could support economic growth.

Market Optimism

Michael Dehal, senior portfolio manager at Dehal Investment Partners with Raymond James, described Scotiabank and BMO’s results as “encouraging,” citing easing tensions and optimism for an imminent trade deal. He expressed increased confidence compared to the previous quarter’s earnings reports.

Overall, the third-quarter earnings report from Canada’s biggest banks reflects a positive trend in the financial sector, with improved performance and a more optimistic outlook despite ongoing trade uncertainties.