Record profits highlight resilience as lenders cut reserves and warn trade uncertainty may slow growth
Record-breaking profits at Canada’s largest lenders signal resilience in the face of trade tensions, but executives cautioned that unresolved tariff negotiations could still weigh on investment, consumer confidence, and economic stability.
According to the Financial Post, five of the Big Six banks exceeded analysts’ expectations in the third quarter, with the Royal Bank of Canada (RBC) and Toronto-Dominion Bank (TD) reporting record earnings.
RBC chief executive Dave McKay said that if “current CUSMA-compliant goods largely maintain their qualified exemption to tariffs, Canada’s effective tariff rate should remain low and the economy should remain resilient.”
CBC News reported that Canada’s five biggest banks reduced provisions for loan-related losses, reflecting easing trade pressures compared with earlier this year.
Derek Holt, Scotiabank’s head of capital markets economics, noted that five banks beat expectations, with only National Bank of Canada narrowly missing forecasts.
BNN Bloomberg highlighted that the Bank of Montreal (BMO) posted $2.33bn in net income, supported by growth in its US division, while Scotiabank earned $2.53bn, advancing a “value over volume” strategy.
RBC’s $5.4bn profit exceeded expectations by more than 18 percent, supported by stronger capital markets and wealth management.
The Canadian Imperial Bank of Commerce (CIBC) also reported better-than-expected results, while TD delivered $2.20 per share, boosted by restructuring progress in its US operations.
National Bank fell short, with weaker trading revenue following its acquisition of Canadian Western Bank.
Executives repeatedly cautioned about the broader implications of tariff uncertainty.
McKay pointed to the risk of “declining consumer confidence, lower corporate profit margins, rising inflation and softening labour markets across both the US and Canada.”
TD’s chief executive Raymond Chun said resilience has been evident on both sides of the border, but “it will likely be a long road before the full impact of tariffs is well understood.”
As per the Financial Post, borrowers front-loaded demand to secure credit while conditions remain stable, contributing to growth in both personal and commercial lending, said Fitch senior director Maria-Gabriella Khoury.
She warned that the improved outlook could prove temporary if trade talks falter.
Veritas Investment Research analyst Shalabh Garg told the Financial Post that although loan growth remains modest, faster deposit growth has expanded margins.
He said reduced provisions for impaired loans reflected stability in employment, adding that this trend was a “great sign” of economic resiliency.
CIBC’s chief executive Victor Dodig said global trade tensions could slow growth and raise inflation, but declining interest rates may support activity and fiscal policy could help shield vulnerable sectors.
Bloomberg noted that while sentiment has improved from the previous quarter, risks tied to slowing growth, high unemployment, and tariff negotiations remain.
