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4w ago

Credit Reserves in Focus as Canada’s Big Six Head Into Q3 Results

Markets look to loan-loss cues to gauge credit risk.

Ontario's financial services watchdog is taking steps to deter deceptive and fraudulent activity in the mortgage sector. Bank towers are shown from Bay Street in Toronto's financial district, on Wednesday, June 16, 2010. THE CANADIAN PRESS/Adrien Veczan
A Royal Bank of Canada (RBC) logo is seen on Bay Street in the heart of the financial district in Toronto, January 22, 2015. The outlook for Canada’s largest banks was already improving as they turned the page on a tough year in 2016. But the bar has risen higher still as, one after another, the Big Six outstripped estimates for fiscal first-quarter profit.

Overview

  • The Big Six report next week in this order: BMO and Scotiabank Tuesday, RBC and National Bank Wednesday, CIBC and TD Thursday.
  • Analysts flag loan-loss provisioning as the biggest swing factor, with expectations for steady or easing reserves compared with the tariff-driven build last quarter.
  • A repeat of last quarter’s trading surge is seen as unlikely, pointing to softer capital-markets contributions to earnings.
  • Bank shares have edged past the TSX this year, stoking valuation worries given weak GDP and rising unemployment.
  • Scotiabank projects about 6% earnings growth year over year, with flat margins and slower loan growth as trade uncertainty weighs on borrowing.