Q3 earnings set the tone as markets eyed credit risk and margins
BMO, Scotiabank, TD, CIBC, RBC, and National Bank are set to open their books on fourth‑quarter results this week, with investors looking back to a solid but cautious third quarter for clues.
Scotiabank is scheduled to report on Tuesday, followed by National Bank and RBC on Wednesday and BMO, CIBC, and TD on Thursday.
Q3 profits climbed as credit worries eased
National Bank of Canada reported a 15% jump in adjusted net income to $1.1 billion in the third quarter, with adjusted earnings per share at $2.68.
Year‑to‑date earnings per share slipped to $7.50, reflecting common shares issued for its Canadian Western Bank acquisition.
Provisions for credit losses came in at $203 million, below the $250 million analysts had expected.
Scotiabank, meanwhile, posted adjusted net income of $2.518 billion in Q3, with diluted EPS rising from $1.63 to $1.88.
Its Canadian banking unit delivered a 56% quarter‑over‑quarter jump in adjusted earnings to $959 million, while global wealth management and global banking and markets reported earnings growth of 13% and 29%, respectively.
The bank set aside $1.04 billion in loan‑loss provisions, undercutting the $1.17 billion expected by analysts.
At BMO, lower provisions also helped. The bank put aside $797 million for potential loan losses in Q3, down from $906 million a year earlier, as net income rose from $1.87 billion ($2.48 per share) to $2.33 billion ($3.14 per share).
Year‑to‑date, adjusted net income increased 14% to more than $6.73 billion. BMO kept its Q4 dividend at $1.63 per common share, up 5% from the same period last year.
BMO’s wealth management adjusted net income climbed 21% year over year to $441 million, and capital markets earnings rose 12% to $442 million.
RBC also delivered a strong beat. Net income climbed 21% year over year to $5.4 billion, with adjusted EPS at $3.84, ahead of analysts’ $3.29 consensus.
Provisions for credit losses were $881 million, below the $1.1 billion forecast. Net income in personal banking rose 22% to more than $1.93 billion, while commercial banking earnings ticked up 2% to $836 million.
TD and CIBC rounded out the quarter with better‑than‑expected results. TD’s adjusted EPS came in at $2.20, beating the $2.05 expected, as overall profit hit $3.37 billion.
Its Canadian retail banking profits rose 4% year over year to $1.95 billion, even as the bank absorbed a $262 million charge tied to adjustments in its US balance sheet after a cap on retail operations. TD booked $971 million in loan‑loss provisions.
At CIBC, Q3 EPS increased to $2.16, supported by $812 million in profit from its Canadian personal and banking division, up 17% year over year. Commercial banking and wealth management earnings rose 19% to $598 million.
CIBC set aside $559 million in credit‑loss provisions – less than widely expected – continuing a theme across the sector.
Loan‑loss provisions and trade tensions stayed in focus
Across the Big Six, Q3 pointed to a firmer footing on credit quality. Much lower provisions for credit losses had become the “biggest story” of recent earnings, suggesting that some alarm over United States trade policy’s impact on Canada had eased.
Still, the Q4 outlook remains tethered to the same fault lines: the trajectory of the US–Canada tariff dispute, the durability of consumer spending, and the Bank of Canada’s rate path.
Heading into Q4, markets are expected to scrutinize whether the third quarter’s easing in PCLs would persist or prove to be “only one quarter” of respite, as Morningstar DBRS’s Carl De Souza had warned.
What Q3 signalled for mortgage and credit markets
On one side, rising profits and lower‑than‑expected PCLs hint at a banking system more comfortable with its credit risk than earlier in the year, particularly after a period when trade tensions and higher rates had pushed provisions higher.
On the other, banks remain wary. Senior executives repeatedly ask when provisions would level off and when rate cuts might arrive, underscoring that credit costs and the Bank of Canada’s decisions still hung over balance‑sheet planning.
As the Big Six moved into Q4, the key question for the mortgage and housing market is whether credit conditions would tighten again if economic data or trade talks deteriorated, or whether the third quarter’s more stable tone would carry into year‑end.
For now, the banks’ Q3 numbers suggested a cautiously improving backdrop – but not one where risk managers could relax.
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