Capital Markets Expected to Drive Big 6 Banks as Earnings Season Kicks Off

Why It Matters

Strong earnings will shape investor sentiment and influence capital allocation across Canada’s financial sector, while the macro backdrop will test banks’ resilience and growth strategies.

Key Takeaways

• Capital markets revenue projected to remain strong
• ROE expansion identified as primary upside driver
• Valuations at historic highs, multiples within historical range
• Credit loss provisions expected flat to modestly rise
• CUSMA review and trade policy remain key uncertainties

Pulse Analysis

The upcoming earnings reports from Canada’s six largest banks arrive at a pivotal moment for the country’s financial landscape. Analysts expect capital‑markets activity—driven by robust equity performance and a relatively dovish regulatory stance—to underpin revenue growth, while wealth‑management divisions benefit from rising investor confidence. At the same time, banks are leveraging strong balance sheets to push return‑on‑equity higher, a metric that investors are watching closely as a barometer of future profitability.

Valuation metrics, however, present a nuanced picture. Although price‑to‑earnings multiples have surged to levels not seen in decades, they remain anchored within the historical band relative to the broader S&P/TSX composite. This suggests that while the market rewards the sector’s earnings momentum, there is limited room for multiple expansion in the near term. Consequently, analysts anticipate that any upside will stem from upward revisions to earnings per share forecasts, driven by sustained double‑digit EPS growth and disciplined cost management.

Credit risk and macro‑economic variables add a layer of complexity to the outlook. Provision for credit losses is expected to stay flat to modestly increase, reflecting cautious optimism amid lingering concerns over consumer credit quality and a softening residential real‑estate market. The pending review of the Canada‑U.S‑Mexico Agreement (CUSMA) further injects uncertainty, as trade policy shifts could impact corporate financing activity. Overall, the banks’ ability to navigate these headwinds while capitalising on capital‑markets strength will determine the trajectory of their earnings and stock performance this quarter.