Profits at the largest Canadian banks are forecast to have increased despite trade tensions. Additionally, the Middle East conflict contributes to broader economic uncertainty. However, they now face tougher tests as more consumers struggle to service their debts. An under-performing housing market weighs on their core domestic business. The large banks – Royal Bank of Canada (RY.TO), TD Bank (TD.TO), BMO (BMO.TO), Bank of Nova Scotia (BNS.TO), CIBC (CM.TO) & National Bank of Canada (NA.TO). Together, they control more than 90% of the Canadian banking market. They are expected to report strong second-quarter earnings starting Wednesday, May 27. This is helped by trading revenue as well as their capital markets businesses.
National Bank analyst Gabriel Dechaine said that banks have been beating expectations consistently for the past two years. With credit losses remaining stubbornly high and potential margin expansion stalling this quarter, the capital markets business is now tasked with delivering once again.
Souring profits
Analysts predict a year-over-year growth of 10% to 25% in the profits of the big six banks during the first quarter ending April 30, 2026. It’s a period marked by uncertainty, which stems from the Middle East conflict, besides slower Canadian economic growth.
The number of Canadians filing for insolvency has been steadily increasing. The figure has risen to about 26% during the 4 months from December ’25 to March ’26. It points to households struggling to keep up with credit card debt. Furthermore, auto loans & potential mortgages. These may push up loan-loss provisions. Furthermore, funds banks set aside to cover bad loans.
Founder of J. Zechner Associates, John Zechner, said, “It’s not a pretty scenario.” Zechner was referring to the rising debt, adding that the banks have really proven themselves. He was also of the view that ever since the financial crisis, the banks are so different. He added that the banks have diversified better. He also noted that the banks have insulated themselves better.
