The Canadian banking sector is facing an array of macro challenges in the coming year, but the big banks’ latest results indicate they are well prepared to weather the storms ahead, says Fitch Ratings.
The Big Six banks all posted strong results for the fiscal year (ended Oct. 31), the rating agency said, with aggregate revenues up 15% year-over-year, and fourth-quarter revenues up 10% from the same quarter in 2024.
“Canadian banks ended 2025 on a strong note driven by broad-based volume growth, margin expansion, record fee income and constructive market conditions,” Fitch said in a new report.
The banks posted strong growth in loans and deposits, with mortgages leading the increase in lending volumes, amid rate cuts from the Bank of Canada, it noted — although some banks saw commercial lending volumes decline.
Credit loss provisions were also stable, or declined, in the quarter, Fitch said, “with most banks reporting lower impaired provisions reflecting better credit performance and slower migration rates.”
At the same time, the banks’ fee income was healthy too.
“Wealth management posted robust earnings due to higher fees and significant increases in assets under management,” Fitch said. “Meanwhile capital markets saw strong M&A/advisory, trading and underwriting activity.”
The banks’ capital levels “remain robust” it noted, with the median common equity Tier 1 ratio staying stable at 13.5% in the quarter.
“This implies a 200 [basis point] buffer above regulatory minimums, which Fitch views as prudent in the current economic environment,” it said.
Indeed, looking ahead, Fitch expects the banks to face a variety of headwinds in 2026, amid ongoing trade tensions with the U.S., and looming uncertainty over the future trade negotiations between Canada and the U.S.
Against that backdrop, the rating agency has a “deteriorating” outlook for the sector.
Despite the looming macro challenges, most of the banks are currently anticipating mid-single digit loan growth in 2026, and they expect credit provisions to remain stable too, Fitch noted.
“Efficiency remains a focus across the banks, with continued investment in technology, AI adoption, and cost discipline. All the banks have positive operating leverage targets for next year,” it said.