Big Six Banks Soar Amid Economic Uncertainty: Why CEOs Are Staying Cautious
Canada’s Big Six Banks Thriving Amid Trade Uncertainty, But Executives Remain Wary
By Naimul Karim | August 29, 2025
Canada’s major banks posted record profits this quarter. They show strong business conditions despite tense trade with the United States. Top executives hold back on celebrations. They worry about economic clouds ahead.
Strong Earnings Reflect Economic Resilience
Five of Canada’s largest banks beat analyst predictions. Major firms like the Royal Bank of Canada (RBC) and Toronto-Dominion Bank (TD) reached record profits. Rising revenues and fewer loan risks drove these results. The gains mark a strong economy even during a U.S. trade war.
Bank leaders, however, stay cautious. They see hope in rising non-essential consumer spending and a lower overall uncertainty than earlier in the year. Yet, they stress that the fragile Canada-United States-Mexico Agreement (CUSMA) remains very important.
Trade Agreement Critical to Stability
CUSMA acts as a shield from harsh American tariffs. The deal soon faces new talks. RBC CEO Dave McKay said, “If most CUSMA goods stay exempt, Canada will have low tariffs and the economy can stay steady.” McKay warned of risks if trade talks fail. He stressed dangers like falling consumer confidence, squeezing company profits, rising inflation, and weaker job markets. Such risks add uncertainty to monetary policy and capital flows.
Modest Growth Continues Amid Challenges
Darryl White, CEO of Bank of Montreal (BMO), said the Canadian economy is in its middle innings. Growth is moderate. “The economy moves at the pace we expect,” White said. “It is not too strong and is not in recession. Some areas slow down naturally.” This steady growth explains why banks show healthy loan activity despite risks.
Borrowers Front-Run Economic Conditions
Maria-Gabriella Khoury, Fitch’s senior director for North American banks, noted many borrowers seek credit early. They expect tougher times ahead. “They line up credit while the economy is stable, not waiting for a toll from tariffs,” she said. Both consumer and commercial loans rose more than expected. This suggests customers act before challenges hit. Still, Khoury warned that this optimism might last only one quarter as tariff talks progress.
Loan Growth Restrained, but Margins Improving
Analyst Shalabh Garg from Veritas Investment Research said bank loan growth stayed in the low single digits. Slower loan growth fits the modest pace of the overall economy. With deposits growing faster than loans, banks cut funding costs and widened net interest margins. Banks also set aside fewer funds for bad loans. Broadly stable unemployment rates further support this improved performance.
Outlook Remains Cautious
Canada’s largest banks continue to succeed in a changing landscape. Yet, executives remain careful. Ongoing U.S. trade policies and the potential for CUSMA renegotiation add risk. For now, leaders avoid premature celebrations.
As Canada faces these challenges, the banking sector’s performance stays a key signal of the country’s overall economic health.
Photo credit: THE CANADIAN PRESS/Andrew Lahodynskyj
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