Executives note signs of improvement but still warn that uncertainties remain
Leaders at two of Canada’s largest banks say the economy is showing signs of improvement, even as they remain cautious about future uncertainty. Bank of Montreal (BMO) and Bank of Nova Scotia (Scotiabank) reported higher-than-expected third-quarter earnings, providing what some executives called “green shoots” of optimism.
The two banking giants eked out strong performance in Q3 even despite ongoing trade tensions with the United States, while Royal Bank of Canada (RBC) and National Bank also saw their profits increase.
In a call with analysts, BMO chief executive Darryl White noted a significant drop in his “uncertainty meter” compared to earlier in the year. He cited a clearer picture of domestic politics and a better understanding of United States policy direction as key factors.
“Earlier this year, my uncertainty meter was very high,” White said. “Today, it’s less high.”
While acknowledging that some cloudiness remains in the economic outlook, particularly regarding geopolitical issues and Canada’s trade relationship with the United States, White said the current environment is “just a little easier to call than it was six months ago.”
Phil Thomas, Scotiabank’s chief risk officer, also suggested a slightly brightening picture. He pointed to credit card spending data that suggests a gradual return of discretionary spending.
“We are cautiously optimistic about the outlook,” Thomas said. He added that while signs of financial stress persist, particularly among younger clients, overall retail sales were up in the second quarter.
Both BMO and Scotiabank set aside lower funds than expected for potentially souring loans in the third quarter, a trend continued by RBC and National Bank in their Q3 earnings released on Wednesday.
That suggests banking giants may be taking a more optimistic view on the national economy than in the earlier quarters of the year, even though there’s been no sign yet of a trade deal between the US and Canada to avert the tariff war that’s erupted between the two countries.
But executives also struck a cautious tone on the outlook. For now, White described the Canadian economy as being in its “middle innings,” characterized by a modest growth environment that is neither robust nor recessionary.
RBC and National Bank will hold their third-quarter earnings calls later today. Canadian Imperial Bank of Commerce (CIBC) and Toronto-Dominion (TD) are due to announce their Q3 financials tomorrow morning (August 28).
What are your thoughts on the recent results of the banking giants? Share your insights in the comments below.
