Debt and capital market loan issuance jumped in Q3 despite headwinds
Canada’s debt and capital markets powered through the turbulence of 2025, posting a 10% year-over-year jump in loan issuance to $1.8 trillion by Q3.
The real estate sector led the charge, closely followed by wholesale and retail, as Canadian businesses sought new money amid shifting economic tides, according to MNP’s latest analysis.
Bay Street’s resilience was on full display, with 502 deals completed in the first half of 2025 and total dealmaking reaching $310 billion.
“Canadian markets delivered one of the strongest first halves in a decade despite uncertainties arising from the proposed U.S. Liberation Day tariffs and Big Beautiful Bill,” MNP reported.
This momentum, MNP said, was underpinned by “continued confidence in Canada’s capital markets and overall economy,” with both global and domestic capital providers viewing Canada as “a steady ship in turbulent waters.”
Private credit fills the funding gap
Private credit emerged as a critical lifeline for Canadian businesses, stepping in where traditional lenders pulled back.
“Private lenders continued to play a pivotal role in financing growth and navigating volatility in the first half of 2025,” MNP said, highlighting asset-backed finance, higher-risk commercial real estate, and distress lending as key areas.
The report flagged that between $5 trillion and $6 trillion in assets could migrate to non-bank lenders over the next decade.
Collaboration between banks and private lenders is gaining traction, with banks providing operating lines while partnering with private credit for specialized financing.
The rise of Canadian family offices as direct investors and lenders is also reshaping the market, with deal values in Canada climbing 16% from 2023 to 2024.
Banks double down on M&A
Canada’s banks delivered stronger-than-expected results in Q3, buoyed by lower provisions for credit losses and revenue growth. But the real story was the wave of consolidation: “There has been more M&A activity in the Canadian banking sector over the past two years than in the past two decades,” MNP said.
Notable deals included RBC’s $13.5 billion acquisition of HSBC Bank Canada and National Bank’s $5 billion share-swap for Canadian Western Bank.
Private credit also made headlines, with Brookfield and Birch Hill teaming up to acquire First National Financial for $2.9 billion.
Despite a 1.6% year-over-year GDP decline in Q2 2025, MNP’s analysis pointed to underlying resilience. “Much of the Q2 2025 GDP decline reflects normalization following a surge in Q1 2025,” the report noted, adding that consumer spending and housing investment both increased, even as manufacturing slowed.
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