Geopolitics and Private Credit Risks Take Center Stage as Canada’s Big Six Banks Prepare to Report Earnings
Canada’s largest banks report Q4 earnings next week. Market watchers note two risks: trade tensions and weak private credit. Even with strong past performance, experts stay cautious.
Earnings Outlook Amid Economic and Trade Concerns
The Big Six banks led Canada’s finance. They posted strong results three months ago. Their leaders now show careful hope for the future. They worry about CUSMA talks. CUSMA once kept U.S. tariffs low.
RBC CEO Dave McKay felt optimistic earlier. He stated that if goods match CUSMA rules, Canada keeps low tariffs and stays strong. New events now cast doubt.
In October, former President Trump delayed trade talks with Canada. He opposed an Ontario ad against tariffs. Though extra tariffs on Canadian exports were threatened, they have not come. Both sides now face a stall, while Prime Minister Carney plans talks with Trump.
Analyst Perspectives: Conservative Tone Expected
Analysts expect a cautious tone. CIBC analyst Paul Holden predicted quiet commentary during earnings. He links this to trade worries and a slow economy.
Matthew Lee from Canaccord added that if trade improves and CUSMA extends, banks might lower large reserves set for loan losses. Yet, banks now hold strong buffers as a safeguard.
Earnings Projections Amid Valuation Concerns
Looking ahead, banks may earn more per share in Q4 2025 than a year ago, though slightly less than Q3. They lean on capital markets, wealth management, and steady credit.
Jefferies analyst John Aiken warns that stocks might be fully valued. He fears earnings misses can force prices down. In a slow economy, the chance for quick gains is low.
Private Credit Risks Draw Scrutiny
Investors also eye private credit. Some U.S. banks took heavy charges from loan fraud. They faced losses with borrowers in troubled commercial mortgage funds. Zions Bancorp in Salt Lake City recorded a US$50-million loss, and Phoenix-based Western Alliance Bancorp had similar issues.
RBC analyst Darko Mihelic urges more clarity on private credit. Banks’ loss buffers are stable now, but more scrutiny may come if problems rise.
Conclusion
Canada’s finance leaders now share their quarterly results. Investors will watch how trade tensions and credit risks affect banks. The banks show strength, yet trade and credit issues call for careful optimism moving forward.
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