The Canadian economy may have been buffeted by ongoing tariff turmoil, but the big banks have, so far, weathered the storm, recording higher revenues for their latest quarter despite elevated uncertainty and growth risks, Fitch Ratings reports.
Aggregate revenues for the Big Six banks were up about 5% quarter over quarter for their fiscal third quarter, which ended July 31, while adjusted aggregate net income rose 14% to $18 billion, the rating agency said in a new report.
“Personal and commercial segments reported mid- to-high-single-digit loan growth and margin expansion as consumers and certain businesses accelerated borrowing while tariff negotiations were ongoing,” Fitch noted.
Aggregate gross loans increased 1% during the quarter, “supported by strong residential mortgage and commercial lending,” it said. Deposits also rose 1% from the previous quarter, “driven by strong client acquisition, a focus on core demand deposits and solid growth in personal and commercial segments.”
Net interest margins edged higher, with the median reported net interest margin at 1.69%, up from 1.64% in the previous quarter, “driven by a favourable deposit mix and margin expansion in key products.”
Credit loss provisions “generally normalized or declined from previous quarters due to improved credit trends and lower impaired loan formations,” Fitch said. The average ratio of credit loss provisions to gross loans fell to 0.38%, down from 0.57% in the prior quarter.
While several banks increased performing provisions “due to macroeconomic uncertainties,” impaired provisions “were generally stable or fell, reflecting better credit performance and slower migration rates.”
The banks’ wealth management businesses also posted “strong fee-based and net sales growth,” the report said.
“Capital market results remained robust, with higher trading, advisory and underwriting fees driving double-digit growth for some banks,” it added.
Regulatory capital remained unchanged, with the banks reporting a median common equity Tier 1 ratio of 13.5%.
“This implies a 200-basis-point buffer above regulatory minimums, which Fitch sees as prudent in the current economic environment,” it said, adding that several banks are expected to review or increase dividends in the next quarter.