Bank Earnings Overview – December 7, 2025

ByDan Kent Published On:

It’s that time of year again, Big Bank earnings. Despite all the doom and gloom about the Canadian economy, Canadian banks continue to reward shareholders with lucrative returns.

In 2024, an equal-weighted portfolio of Canadian banks returned ~25%. Many investors thought the run was likely over and we might see an average 2025 from the banks. This couldn’t be further from what played out.

Banks have doubled the returns of the S&P 500 in 2025. Yes, boring Canadian banks have crushed the performance of many of the fastest growing companies in the United States.

I ended up rebalancing my portfolio in 2024 due to the large run-up in bank stocks. My allocations had gotten too high. I will discuss what I plan to do with my bank stocks at the end of this newsletter, as my strategy has changed a bit.

I won’t discuss portfolio moves in this newsletter as it will already be a lengthy one, but most all of my moves this week were fairly routine, adding Boyd (TSE:BYD), Brookfield (TSE:BN), and Cargojet (TSE:CJT) with dividends received.

Bank Earnings

Typically, I discuss each individual bank and then dive into key performance indicators across all 6 banks. I find the newsletter gets too “wordy” quickly. So, I’m going to try a bit of a different format that I hope can jam-pack more information in fewer words.

As always, I appreciate any feedback on the content, style, or design of my newsletters and how they can be improved. You can always reply to these emails and let me know your thoughts if you wish.

Scotiabank (TSE:BNS)

I have been impressed with Scotia over the last while. This is a company I sold in 2019 after extensive operational issues. However, I will give credit where credit is due. The company has had a heck of a 2025.

Notes from the quarter:

  • Impressive earnings growth (23%), primarily because of services given to corporations, governments, institutions etc. Retail is struggling a bit.
  • Canadian banking had one of its softer quarters of the year. This is primarily due to mortgages in the GTA putting stress on the loan portfolio.
  • Provision for credit losses ticked up again (will speak on this in KPI section).
  • The company has lofty expectations for 2026. On the top-end of guidance it expects double-digit earnings growth and a steep decline in provisions.
  • Mortgage 90+ day delinquencies are up more than ~10% on the year. Still relatively low at ~0.24% of loans, but something to watch.
  • The company’s “North American Corridor” strategy is paying off. The bank is now realizing it needs to grow in the US and not just internationally.

Things to keep an eye on for Scotia moving forward

  • Continued growth in its US wholesale business.
  • Mortgage delinquencies here in Canada, particularly the GTA.
  • The company is moving away from low-margin lending and focusing on handling large-scale clients’ entire businesses (deposits, loans, hedging, etc). This is working for now, and if it continues, could drive results.
  • Can the company break double-digit earnings growth in 2026? If it does, will dividend growth come back?

Royal Bank (TSE:RY)

Impressive quarters and Royal Bank seem to go hand in hand. That said, the company is trading at its most expensive valuation in more than 15 years, so I’m not all that surprised to see muted price action this week on earnings. I own Royal and National, with little plans to change. They are simply outstanding institutions. Expensive, but best-in-class in my opinion.

Notes from the quarter:

  • Earnings grew by 25%. As mentioned, you’d expect a bigger reaction, but I believe this type of quarter was priced-in.
  • Return on equity of 17.2%. This has been trending in the right direction so much that management boosted its ROE outlook to 17%. Prior, it was 16%.
  • Personal banking in Canada grew by 20%. Canada is this company’s bread and butter, no doubt.
  • The acquisition of HSBC is paying off brilliantly. They’re expected to exceed their initially expected synergies from the acquisition.
  • Capital markets were up 45% year-over-year. Market activity is benefitting a lot of these banks substantially.
  • Provisions stayed steady. However, much like Scotia, the bank warned of higher delinquencies in Ontario due to unemployment and mortgage renewals.
  • The company developed its own generative AI model, called RBC Assist. Over 30,000 employees are now using it.
  • They raised the dividend by 6.5%.

Things to keep an eye on for Royal moving forward

  • The company’s provisions. They expect them to plateau next year around the levels we are currently at, and start declining in 2027.
  • The health of the Ontario economy and the housing market in the GTA. Continued pressure on this area will put pressure on RBC’s results.
  • Valuations. The bank is expensive. I would argue priced to perfection. We had 25% year-over-year earnings growth and the stock was flat on earnings day.

National Bank (TSE:NA)

It was not a blowout quarter by National by any stretch, but it was still what the bank does best, and that is report steady, consistent growth. The bank continues to be one of the best performers in 2025.

Notes from the quarter:

  • Acquired Laurentian Bank’s retail assets. The smallest of the Big 6 seems to be making the most M&A moves, gobbling up smaller Canadian players. At this point, there aren’t many remaining outside of Equitable.
  • Earnings closed out the year up 9%, which is outstanding considering the macro-headwinds the bank currently has. We have to remember, this bank is exposed much more to Canada than the other majors.
  • Strong activity in the commercial lending space, with loans up 12%. Personal mortgages grew 8%.
  • Much like the other banks, wealth management and capital markets are driving a ton of profit, with earnings up 18% and 34%, respectively.
  • Management is targeting 5-10% earnings growth in 2026 with a ROE of 15%. This is relatively inline with what they did in 2025.
  • They raised the dividend by 5.1%.

Things to keep an eye on for National moving forward

  • Canadian Western Provisions. The bank is guiding to 25-35 basis point PCL ratios in 2026, but mentioned CWB’s provisions will be “lumpy.” If they continue to drag on the business, it could put some pressure on them.
  • Since Capital Markets has been subsidizing other areas, if that area normalizes, we could see slower earnings growth unless personal banking can pick up the slack.
  • 2026 has the chance of being a “transitional” year for the company, with it continuing to integrate CWB and now Laurentian. Patience might be needed, but if it executes, 2027 could be big.

Bank of Montreal (TSE:BMO)

BMO continues to post solid quarters. Nothing exceptional, but nothing poor either. I would say they reported the softest quarter out of the major banks, but let’s not kid ourselves, if you owned Canadian banks you’ve been spoiled in 2025. It was far from a bad quarter.

Notes from the quarter:

  • You will see exceptional earnings growth (73%) compared to Q4 of last year. However, it is because provisions were cut in half.
  • Due to that, return on equity is seeing a big boost, but still lags many of the top major players at 11.8%.
  • On the year, earnings increased 26% because of normalized provisions.
  • The company’s Canadian arm struggled in terms of loan growth. It was effectively flat, and the company mentioned it will be muted in 2026 as well. This could be why the share price was under pressure on earnings day.
  • The company’s restructuring in the US is starting to pay off. Net income doubled, and the bank plans to focus more on opening branches in highly dense areas such as California.
  • Much like the other banks, Capital Markets and Wealth Management posted exceptional growth, with earnings up by 28% and 95%, respectively.
  • They raised the dividend by 2%.

Things to keep an eye on for BMO moving forward

  • They are selling 138 branches (in markets where they lack scale) and plan to open 150 new ones (primarily in California) over five years. If they lose deposits faster than they can gather new ones in California, their funding costs will rise
  • They will take a $225 million charge in Q1 2026 to cut jobs, promising $250 million in annualized savings. Investors need to hold them to this “payback period.” Plenty of times these cost savings never come to fruition.
  • Capital market profits are allowing the US business to transition at this point. If capital markets revert to the mean before the US transition is finished, we could see soft earnings in 2026.

CIBC (TSE:CM)

I will be the first to admit that I was wrong about CIBC. I had expected continual pressure on the Canadian economy and housing market to heavily weigh on this company. This just hasn’t been the case. In fact, it’s reported outstanding results for the better part of a year now. I would argue it reported the best quarter out of all the banks yet again.

Notes from the quarter:

  • The bank reported double-digit earnings growth yet again. On the year, it reported 16% earnings growth, far exceeding the banks 7-10% guidance.
  • The bank reported a 12% bump in revenue and an expansion in net interest margins in its Canadian segment, but higher provisions offset most of this, resulting in flat net income.
  • The company’s US expansion is going well, with net income up 35% year-over-year and a decline in overall loan loss provisions. Deposits also remain strong, up by 8%.
  • The bank reported some of the strongest capital market growth of any of the banks, with net income up 58% and revenue up 32%. The bank’s US capital market segment grew by 48% and now represents 38% of capital market revenue.
  • The company hit the low end of its provision for credit losses target on the year.
  • They raised the dividend by 10.3%

Things to keep an eye on for CIBC moving forward

  • A huge driver of their Canadian success was expanding Net Interest Margin. Management admitted this tailwind will moderate significantly in 2026. This could impact earnings.
  • Net income in Capital Markets exploded by 58%. This segment is historically volatile and cyclical. If this segment cools off or reverts to the mean in 2026, the bank will need the Canadian retail side to perform almost perfectly to hit their ambitious 15% ROE target.

TD Bank (TSE:TD)

It has been a relatively strong rebound year for Toronto Dominion. The bank’s results aren’t overly good, but valuations were depressed enough that the bank has gone on an impressive run in 2025.

Notes from the quarter:

  • The bank grew earnings by 5% year-over-year, one of the lower growth rates out of all banks. However, this was well above the company’s guidance, which was effectively guiding for no growth in the best case scenario.
  • The bank delivered upbeat guidance next year, expecting earnings growth of 8% and returns on equity of around 13%. This is lower than TD Bank has historically reported, but again, anti-money laundering issues are still weighing on the company.
  • The bank reported record revenue, deposits, and loan volumes in its Canadian segment.
  • The bank has reduced assets in the US by 10% to create roughly a $52B buffer against its US asset cap. This should allow it to acquire higher quality US loans and drive what earnings growth it can there.
  • The company’s provisions for credit losses came in at the low end of its annual guidance.
  • The company is still aggressively buying back shares, repurchasing around 65 million.
  • They raised the dividend 2.9%

Things to keep an eye on for TD Bank moving forward

  • Watch the buffer on their US assets closely. If this shrinks too fast due to deposit inflows or aggressive lending, they might have to turn away business again, which would hurt the stock.
  • 2026 will be a “show me” year. After a messy 2025 full of restructuring charges and regulatory fines, investors need to see clean earnings growth.
  • The bank spent $507 million on AML remediation in 2025 and expects to spend a similar amount in 2026. This is a permanent tax on their earnings for the foreseeable future. Don’t expect these costs to vanish anytime soon.

My overall thoughts on the quarter for the banks

The banks had a heck of a 2025, there is no doubt. If I were to rank them from best to worst on the year, I’d say this is fairly accurate:

  1. CIBC
  2. Royal Bank
  3. TD Bank
  4. Scotiabank
  5. National Bank
  6. Bank of Montreal

However, I want to make one thing clear. Every single bank had an exceptional year.

If you look to my list above, you might notice some banks are ranked lower but returned more in 2025. My rankings above are more so from a quality perspective. I do feel Royal had a much better 2025 than TD Bank. However, TD was beat up from anti-money laundering issues, so it performed better pricing wise.

The banks are positioned for continued dividend growth

As most here know I am a total-return investor. However, I’m a big fan of dividends when they contribute positively to total return. And yes, this is a thing. Dividends can easily be value-destructive. Investors earn income all while that income deteriorates their share price through poor dividend policy.

The Canadian banks remain incredibly well-positioned to not only maintain these payouts but continue growing them for years to come. Most of the banks are operating comfortably within their target payout ratios. This leaves them with plenty of room to cushion against any potential bad loans while still rewarding shareholders.

Royal Bank and National Bank, in particular, are in a sweet spot where their earnings growth is outpacing their payouts, setting the stage for what could be continued aggressive hikes in 2026.

The outlier right now is Scotiabank, which currently has the tightest payout ratio of the group and opted to hold its dividend steady for a few years before resuming growth. However, the bank is showing signs of a turnaround with impressive earnings growth this year driven by its strategic shift away from international markets toward North America.

If they can hit their double-digit earnings growth targets for 2026, that elevated payout ratio will naturally come down, clearing the runway for them to become a consistent dividend grower again.

Will 2026 be a down year?

2025 seems like it was a bit too good to be true given the state of the Canadian economy. Capital Markets and Wealth Management fueled this run, and the growth in these segments is likely not sustainable.

I do think we need to temper expectations on bank stocks in 2026.

History tells us that capital markets revenue is notoriously mean-reverting. We saw this in 2022 when revenues dropped after the 2021 boom. I’ve attached an image of Royal Bank’s capital markets revenue to give you an idea. When the markets cooled down in both 2018 and 2022, the company’s capital market revenue declined that year.

If trading cools off in 2026 before the Canadian consumer is healthy enough to start borrowing again, we could hit a short-term earnings snag.

The banks used a volatile, cyclical boom to subsidize a weak economy in 2025 as personal and commercial banking segments have been toughing it through a period of flat loan growth, rising credit stress, and compressing margins.

Looking ahead to 2026, investors should likely temper their expectations in terms of the banks. Valuations for many are at multi-year highs (looking at you, RBC) and credit provisions likely will remain a headwind in Ontario.

I’m not saying the banks will go through a large-scale correction or anything. I’m just saying after 2 straight years of market-beating returns, I would not be shocked if they have a “meh” year in 2026.

What I plan to do with my banking positions at the end of the year

If you’ve been a member here for long enough you will know that I typically rebalance my portfolio at the end of the year.

I am not super strict on my rebalancing. If a company gets larger than I’d like in terms of allocations, I’ll often let winners win. As the saying goes, don’t trim your flowers and water your weeds. The only instances where I will do this are in heavily volatile sectors like fashion (Aritzia).

Because I trimmed my banks at the end of last year, members might be thinking I will do the same. However, I won’t be.

My decision to trim the banks last year was primarily due to my overall exposure to the banking sector. Because I held Equitable Bank last year, that pushed overall allocations upwards.

Now, holding only Royal and National, I’m completely fine with the allocations I have. These are two of the best companies in the country, and I’m happy to simply set and forget.