The looming impact of higher U.S. tariffs was reflected in the latest financial results for the big Canadian banks, says Fitch Ratings.
In a new report, the rating agency said adjusted aggregate revenues for the Big Six banks and Desjardins Group declined by 3% in their fiscal second quarter (ended April 30) to $63 billion, and adjusted aggregate net income was down by 8% quarter over quarter to $16 billion.
“Canadian banks experienced slow revenue momentum in the second quarter of 2025 as they began to position themselves for the economic impacts of tariffs,” Fitch said.
Loan growth was flat in the quarter due to weak consumer and business confidence amid the elevated policy uncertainty, which stoked hesitation about deploying capital. Fitch said it expects the banks to see loan growth in the low single digits throughout 2025, particularly in personal and commercial loans — although this could see a boost from government efforts to cushion the effects of the tariff shocks on the economy.
Additionally, the banks increased their loan loss provisions in anticipation of a gloomier economy and higher unemployment due to worsening trade conditions and the growing threat of a recession and of stagflation. As a result, average provisions for credit losses (PCLs) rose to 0.57% of gross loans in the second quarter, up from 0.47% in the first quarter, Fitch reported.
Despite the increase in provisions, some banks actually saw their loan delinquencies improve, “particularly in the personal retail segments,” it noted.
However, the median impaired loan ratio still rose to 0.88% in the second quarter from 0.81%, it said.
Net interest margins (NIMs) also improved slightly in the quarter, with the median reported NIM edging up to 1.64% in the second quarter from 1.62%, as the Bank of Canada continued to cut rates.
Wealth management was also affected by the gloomier economic outlook, Fitch noted, with aggregate revenue in that segment down 3% quarter over quarter.
And while the uncertainty surrounding U.S. trade policy boosted market volatility — which benefited the banks’ capital markets trading results — aggregate capital markets revenue fell by 5% during the quarter.
That said, revenues in this segment remain elevated compared with 2024, topping last year’s quarterly average by almost 20%, Fitch noted.
The banks’ capital positions also held up in the quarter. Fitch reported that the big banks ended the second quarter with a median common equity Tier 1 ratio of 13.5%, compared with 13.6% in the first quarter.
“This implies a 200 [basis point] buffer from regulatory minimums, which Fitch views as an appropriate precaution in the current economic environment,” it said.