Canada’s largest lenders all reported third quarter earnings this week, and most exceeded expectations despite an uncertain economic backdrop amid the ongoing trade war with the U.S.
Here’s what experts had to say about the latest results from Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Montreal (BMO), Bank of Nova Scotia (Scotiabank), Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada (National).
BMO beats on U.S. strength
BMO kicked off the week on Tuesday, reporting net income of $2.33 billion, or $3.14 per diluted share, for the quarter ending July 31. That was up from $1.87 billion, or $2.48 per diluted share, a year earlier, beating estimates.
Quarterly revenue totalled $8.99 billion, up from $8.19 billion in the same period a year ago, driven by strength in the bank’s U.S. personal and commercial banking unit, which earned $709 million, up from $470 million last year.
BMO’s provisions for credit losses, the amount the bank puts aside to cover potentially bad loans, totalled $797 million for the quarter, compared to $906 million a year earlier.
“It was a very, very clean beat,” John Zechner, chairman and founder of J. Zechner Associates, told BNN Bloomberg in an interview on Tuesday.
“The loan loss provisions are less than expected, they dropped, which is a little surprising given the economic environment we appear to be going into and all the risk and everything… but stocks are at record-highs right now.”
Zechner said the one “slight negative” that could be pointed to in the third quarter for BMO was a lack of growth in the bank’s loan book, although that’s to be expected given the current economic backdrop, he said.
“There’s no loan growth, which is not surprising,” said Zechner.
“In this environment, people aren’t taking out money to spend as the consumer is getting a little more hamstrung and companies with the changes in policies and tariffs… we’re not seeing much in capital expenditures or even employment gains.”
‘Value over volume’ for Scotiabank
Scotiabank, which also released third quarter results on Tuesday, reported a profit of $2.53 billion, up from $1.91 billion a year earlier, amounting to $1.84 per diluted share, up from $1.41 per share last year, exceeding expectations.
The bank’s provisions for credit losses were also down slightly, totalling $1.04 billion compared to $1.05 billion in the third quarter of 2024.
Scotiabank’s president and CEO told BNN Bloomberg in an interview on Wednesday that the lender is seven quarters into a “long term strategy repositioning” that began when he assumed the bank’s top job in 2023.
“This was a quarter where all of the business lines contributed to what was both good top line and good bottom line results,” said Scott Thomson.
Prior to Thomson’s appointment as CEO, the bank had been lagging its peers both in terms of performance and stock price, partly due to overexposure in Latin America, Zechner noted.
However, over the past two years the bank has put a renewed focus on its Canadian business, while preaching a “value over volume” approach, Thomson said.
“Historically, we had been a big lender with monoline clients, where we deployed the balance sheet but didn’t necessarily deploy the rest of our capabilities to help the client be successful,” he explained.
“Obviously the balance sheet’s important and we’re going to continue to deploy (it), but we want to provide capabilities beyond the balance sheet that can help our clients.”
RBC beats as credit loss provisions rise
RBC also beat expectations in its earnings release Wednesday. Canada’s largest company reported a third-quarter profit of $5.4 billion, up from $4.5 billion last year, amounting to $3.75 per diluted share, up from $3.09 per diluted share in the third quarter of 2024.
Revenue also grew, totalling $16.99 billion compared to $14.63 billion a year ago, thanks to strong capital markets, wealth management, and personal and commercial banking results.
But unlike BMO and Scotiabank, RBC’s provisions for credit losses were higher than they were a year ago. The bank set aside $881 million for potentially bad loans in the quarter, up from $659 million in 2024.
“In the ongoing uncertainty this quarter, we have maintained our prudent posture and retained the elevated weightings to our downside scenarios in line with last quarter,” Graeme Hepworth, RBC’s chief risk officer, told analysts on a conference call Wednesday.
“We continue to expect (provisions for credit losses) and impaired loans to remain elevated for the next few quarters in a similar overall range to what we’ve experienced over the first three quarters of the year, potentially offset by releases and performing allowances as credit outcomes improve.”
Despite the bank’s more cautious stance amid ongoing economic uncertainty, RBC still set aside less money for bad loans than analysts were expecting; a big reason why it outperformed earnings per share (EPS) estimates, according to a portfolio manager at Focus Wealth Management.
“In addition to (that), if we look at the previous quarter, their capital markets revenue really underperformed, especially considering all the other banks did quite well in that division,” Alexander Macdonald told BNN Bloomberg in a Wednesday interview.
“Fast forward to (the third quarter) … RBC’s capital markets division has done much better, and that was also one of the two big contributors to the EPS outperformance.”
National falls short
National was the sole ‘Big 6’ bank that failed to meet expectations in the third quarter, as its adjusted EPS of $2.68 came in just shy of the average analyst estimate of $2.69 per share, The Canadian Press reported Wednesday.
Despite the miss, the Montreal-based lender grew its quarterly profit to $1.07 billion from $1.03 billion a year earlier, while revenue reach 3.45 billion compared to $3 billion in 2024.
In its second quarter, National reported record capital markets profit that it was unable to replicate in its latest results, Macdonald explained. National shares were down more than one per cent in afternoon trading in Toronto on Thursday.
“Again, if we rewind to the second quarter when I was talking about those capital markets numbers that all the banks except for RBC put up, National was the leader on that front,” said Macdonald.
“Specifically, their trading revenue came in at $750 million for the quarter, which for a bank of National’s size is just astronomically large. Fast forward to the most recent quarter, that trading revenue actually fell by 50 per cent quarter over quarter.”
Macdonald noted that National is still adjusting to its high-profile $5 billion acquisition of Canada Western Bank, which closed earlier this year.
“Right now, it’s got its hands full with the Canadian Western Bank acquisition, so obviously regionally, historically speaking, National was a strong player in Quebec and Eastern Canada, less so in Western Canada,” he said.
“So, it is a risk, I mean so far, so good… but integrating a company of that size takes a lot of work.”
More ‘solid results’ from CIBC
On Thursday, CIBC reported results that handily beat expectations. On an adjusted basis, the bank said it earned $2.16 per share, up from $1.93 per share last year and well above the average analyst estimate of $2 per share, The Canadian Press reported.
Third quarter revenue totalled $7.25 billion, up from $6.60 billion in 2024, while the bank put aside $559 million for credit losses, up from $483 million last year.
“It’s just a continuation of what’s been really solid results from CIBC for some time now,” Ryan Bushell, CEO and portfolio manager at Newhaven Asset Management, told BNN Bloomberg in a Thursday interview.
“Not surprised to see that… there’s more ahead, I think, for CIBC.”
But despite the strong performance, the bank’s leadership reiterated the need to be cautious going forward given the ever-changing trade and economic policies of U.S. President Donald Trump’s administration.
“Global trade tensions may result in slower growth and higher inflation in many countries, including Canada and the United States,” CIBC CEO Victor Dodig told analysts on a Thursday conference call.
“However, we anticipate that declining interest rates will help support economic growth, while fiscal policy will offer targeted relief to the sectors most affected by trade negotiations.”
CIBC shares rose more than two per cent, reaching a record high, in afternoon trading on Thursday.
TD’s ‘nice comeback’
TD rounded out bank earnings week on Thursday, reporting that on an adjusted basis, it earned $2.20 per diluted share in its third quarter, higher than the average analyst estimate of $2.05 per share, The Canadian Press reported Thursday.
Revenue for the quarter exceeded $15 billion, up from $14.2 billion in 2024, while the bank’s provisions for credit losses totalled $971 million, down from $1.07 billion last year.
The Toronto-based lender continues to grapple with the fallout from a money laundering scandal in the U.S. that led to a US$3 billion fine after the bank pled guilty to multiple charges last year and set about restructuring its American business.
“This quarter, we made significant progress on our U.S. balance sheet restructuring. We completed the investment portfolio repositioning announced last October and achieved our targeted 10 per cent asset reduction,” Raymond Chun, TD’s CEO, said on an earnings call on Thursday.
“The bank also continued to prioritize and execute on our (anti-money laundering) remediation.”
Bushell said TD’s strong third quarter performance represents a “nice comeback” for Canada’s second largest bank.
“We didn’t expect it to turnaround this quickly. There’s still issues in the U.S. in terms of their allowed growth, and they are still restructuring their management team,” he said.
“But the stock market, generally, is rewarding financials right now.”
Banks have ‘moved in line with the market’
As a whole, strong performances from Canada’s largest lenders in the third quarter helped their respective stock prices catch up to the broader market, says Richard Fogler, managing director, CIO and portfolio manager at Kingwest & Company.
“They’ve moved up a bit but they’re not up that much this year relative to the market… so they’ve moved in line with the market,” he said in an interview with BNN Bloomberg on Thursday.
“And we’re at the end of the week, everybody beat expectations, except National.”
Fogler said that when it comes to investing in Canada’s biggest banks, they may experience temporary fluctuations alongside the broader market but historically speaking they’re one of the safest bets out there.
“The fact is,” he said, “if you’d held the banks for the last 25 years, you’d be very happy.”
With files from The Canadian Press
