Two months after downgrading its outlook for the Canadian banking sector from “neutral” to “deteriorating,” Fitch Ratings says solid fundamentals will see the sector through a soft economic forecast.
The report, issued Tuesday, covers the Big Six and Desjardins Group.
“Fitch believes the banks enter this period of economic weakness, caused by tariff uncertainty, from a position of strength in terms of credit fundamentals and financial performance indicators,” according to the report. “The banks’ high factor scores largely reflect their strong brand recognition and dominant domestic franchises that range across multiple product and service categories.”
| Organization | Long-term issuer default rating/ outlook | Viability rating |
| RBC | AA-/Stable | aa- |
| TD Bank | AA-/Negative | aa- |
| Scotiabank | AA-/Stable | aa- |
| BMO | AA-/Stable | aa- |
| CIBC | AA-/Stable | aa- |
| National Bank | A+/Stable | a+ |
| Desjardins Group | AA-/Stable | aa- |
Source: Fitch Ratings
AA ratings represent “very high credit quality.” A ratings signal “high credit quality.”
Fitch said domestic growth expectations are tempered by Canada’s weak economic outlook. U.S. trade policy and Ottawa’s recent pullback on immigration levels will both weight on the banks’ lending business.
“Furthermore, the labour market is under pressure and the debt servicing burden for Canadian households remains high,” the rating agency said.
The banks’ capital markets business lines benefited from a sharp increase in trading volumes during a volatile first half. Fitch said that pace won’t continue.
RBC, BMO and CIBC each received a risk profile rating of aa-. TD, Scotiabank, National Bank and Desjardins scored one notch lower, at a+. TD’s score reflects its recent compliance issues in the U.S., where it faced a money laundering scandal. Scotiabank’s exposure to Latin American markets accounts for its score, as does National Bank’s and Desjardins’ concentration in the Quebec market.
“Fitch believes the banks’ risk profiles are largely conservative and supported by well-managed exposures and underwriting practices that have led to low loan impairments and credit losses. Underwriting for residential mortgages (the largest asset class on average) is supported by low loan-to-value ratios, minimum credit scores and a solid regulatory underwriting framework …” Fitch said.
“The domestic economy remains under considerable pressure,” it added. “Business investment contracted in 1Q25, and continued policy uncertainty is expected to weigh further on companies’ willingness to spend on capital expenditures. … Consumers are also facing challenges, including higher interest payments and rising unemployment.”
Earnings outlook
RBC leads the pack with an aa- earnings and profitability rating. Scotiabank, BMO, CIBC and National Bank each hold an a+ ranking. TD received an a, while Desjardins was rated bbb+ (for “good credit quality”). That’s a reflection of Desjardins’ co-op model, Fitch said.
“We expect that [RBC] will continue to outperform the peer group, driven by its leading market positions and distribution, in addition to its strong capital markets and wealth businesses,” according to the report.
It also noted that TD has launched a strategic review that includes “optimizing capital allocation among its business segments and simplifying the business structure.” Results are due to be shared at an investor day event Sept. 29.
Fitch is forecasting 0.9% GDP growth for Canada this year, 0.7% growth in 2026 and 1.5% growth in 2027.