Bank Earnings Overview

It is that time of year again! Canadian bank earnings. Every quarter, I do a dive into every Big 6 Bank’s earnings and then go in-depth on some key performance indicators across all the institutions.

This is always the most popular newsletter piece I issue all year, and for good reason. Canadian banks remain a staple in many portfolios, and they’ve been surprisingly resilient through a fairly rough economic backdrop in 2025.

HEB, which is the Hamilton Equal Weight Banking ETF, is up more than 17% year-to-date and 30%~ over the last year.

I won’t waste much time getting right into this newsletter, as it is usually jam-packed with information.

Another note, many have asked why I don’t cover Equitable in this newsletter. I like to keep this one Big 6-related. My Equitable Bank Bull List report is updated on the website, and you can read it here.

Earnings

Scotiabank (TSE:BNS)

Scotia has been caught in a rut for a long time. I sold my position in 2019 due to frustrations from a lack of performance. Fast forward to 2025, and its operational issues are still one of the main topics for the bank.

However, this was a solid quarter from Scotia, one of the best I’ve seen from it in years.

Revenue increased by 13%, earnings by 15%, and the company came in well ahead of expectations. In addition to this, provisions for credit losses fell by a substantial amount on a quarter-over-quarter basis, primarily in their Canadian arm of the business. However, I’ll leave provision talks for the Key Performance Indicators section of this newsletter, where I break down all the banks at once.

Although it was a solid quarter from Scotia, the underlying issues remain the same. The Canadian arm of the bank is doing well. Nothing spectacular like we’ve witnessed from banks like National and CIBC, but just “ok.” The issue lies in the bank’s international segment.

While loans in Canada increased by 3% and deposits by 2%, international loans declined by 3% and deposits were flat. If you look to the chart below, the company’s Canadian net interest income is growing well; however, international is still lagging.

A lot of this is in an effort for Scotia to focus more on quality versus quantity internationally. They mentioned on the call that they have now pruned a lot of poor-quality out of their international arm and are ready to return to growth in 2026.

For me, this is a “I’ll believe it when I see it” situation. One solid quarter doesn’t change 7+ years of subpar performance, but this quarter was certainly a step in the right direction. If it continues to post quarters like this, we could see a lot of momentum as the stock is no doubt cheap.

Bank of Montreal (TSE:BMO)

Bank of Montreal’s rough patch in 2022/2023 seems to have been short-lived, and the company is back to being one of the better-performing Canadian banks from an operational standpoint.

I will admit, the rapid acceleration in provisions from the company during that time period did scare me (see chart below), to the point I ended up selling it and buying into National.

This has still worked out for me, with National outperforming BMO during that time period, but BMO has certainly been an outstanding “buy the dip” opportunity on fears.

Revenue increased by 10% and earnings are up 22%. Much like Scotia, the main driver of stronger earnings has been a significant reduction in provisions for credit losses as these banks start to get a clearer picture of the economy and the impacts of tariffs. But more on that later.

The company posted around 2% loan growth and 3% deposit growth across the entire bank. On the Canadian side of things, much like the other institutions, it is seeing moderate growth in Canada and a bit of a pullback in the United States.

However, the US is no longer the drag on the business it once was in 2022/2023. The company has gone through some efforts to trim back low-quality loans, and it mentions the reset is nearly complete.

Commercial and retail exposure both in Canada and the US continues to be a drag, but I like what I saw from the bank this quarter. Although I do feel National and Royal are stronger long-term holds, I wouldn’t blame any investor for holding BMO. It is an outstanding institution.

National Bank (TSE:NA)

For the first time in quite some time, National posted what I would say is the weakest quarter out of all Big 6 Banks.

I don’t necessarily think the quarter was bad, it just wasn’t as good as the others. National Bank was the only major bank in the group to miss analyst estimates on EPS.

While many other banks are reporting lower loan loss provisions which are ultimately fueling earnings, National’s stayed steady. This is certainly nothing concerning as the bank has one of the lower loan loss ratios out of all of the major institutions, but it simply didn’t have the tailwind of lower provisions helping it this quarter.

When we look to the Personal and Commercial segment, it performed quite well.

Revenue grew 21% factoring in the new acquisition of Canadian Western Bank, and overall net income increased by 5%. Personal loans grew by 12% and Commercial Loans by 61%.

However, take this number with a grain of salt, as most of it was acquisition-based. However, one of the main issues in this segment of the business was declining net interest margins, or NIM. A higher NIM means the bank is earning more money from lending, relative to what it costs to fund those loans. The large amounts of volume growth offset the declines in NIM to a certain degree, but it is certainly worth monitoring, as they expect it to continue to decline.

The company announced a share buyback plan that was relatively conservative in nature, coming in at only 2% of total shares outstanding. Considering the financial position they’re in, that being one with some of the lowest provisions out of any of the major banks, I would have expected something a little higher.

Overall, it was a bit of a soft quarter. I’m not concerned whatsoever, and the decline post-earnings was likely some investors rotating out of National and into better-performing banks. As a long-term investor, I’m not interested in this whatsoever.

Royal Bank of Canada (TSE:RY)

I can say with confidence that Royal Bank reported the best quarter out of all of the Big 6 Banks. This is saying something as well, because outside of National, it was an outstanding quarter for each of them.

Revenue increased by 16% and earnings per share by 18%. Despite a harsh macro environment, this company continues to accelerate growth in its Canadian arm and drive stronger returns on equity.

The large beat was due to a substantial decline in provisions for credit losses compared to last quarter, but I’ll speak on that more in the PCL section later on.

The bulk of the outperformance is primarily due to personal banking, which saw earnings grow by more than 21%.

Commercial is still struggling, growing 2% year-over-year. Considering the state of the economy and cautious spending by businesses in light of tariffs, I’m not all that surprised to see this.

Capital markets also continue to excel as the equity markets remain red hot, with double-digit growth in that area as well.

Overall, the company had 3% growth in total loans and total deposits, which is certainly a healthy level of growth in the current economy.

I think what is shining through here with RBC is the company’s diversified loan book. Yes, tariffs are putting pressure on a lot of Canadian banks, particularly those with considerable Canadian exposure (National, Equitable), but Royal is somewhat sheltered by this due to its diversity.

Overall, it was a great quarter, and I’m happy to continue owning and accumulating shares.

Toronto Dominion Bank (TSE:TD)

TD Bank posted a solid quarter, coming in well ahead of expectations in terms of overall earnings. Net income was up 6% year-over-year, and revenue increased by 8%.

Much like the other banks, the Canadian arm of the business is performing exceptionally well. The company posted record revenue, earnings, deposits, and loan volumes. Average loans and deposits were both up 4% YoY, with card volumes and RESL (Real Estate Secured Lending) posting strong quarters.

On the US side, Anti Money Laundering remediation and balance sheet restructuring are still the highlights. The company expects to get rid of $35B in loans by Fiscal 2026 on its US loan book, which will open it up to be able to lend again.

Remember, the company had an asset cap placed on its US operations, and it needed to get rid of loans in order to gain some flexibility.

Initially, the bank opened up strong on the day, but had a large swing in price. This is likely due to guidance, in which it expects expense growth to be at the upper target of its range, and now expects AML remediation costs to persist into 2026, around $500M~ USD per year.

If you ever see a large green open and then a steep drop off, it is likely due to something mentioned in the conference call, and I believe this was the case. Many investors might have been hopeful the added AML expenses would start to ease, but it is looking like they won’t, at least for 2026.

Outside of this, great quarter for the company, which certainly needed it with the regulatory overhang it currently has.

CIBC (TSE:CM)

CIBC’s turnaround is still in full swing, and it put up another rock-solid quarter. As I’ve mentioned previously, I would not own this bank due to its heavy Canadian-based real estate exposure. But, I do have to give credit where credit is due: it has really turned things around compared to a couple of years ago.

Revenue increased by 10% and earnings were up by 12%. I’ll speak on this more on the provision side of things, but they came in below analyst expectations yet again, which has been a recurring theme for CIBC.

Unlike many other banks who are struggling on the commercial side of the business, CIBC is excelling.

Commercial banking revenue increased by 10% and net income by 19%. The only difficulty here is CIBC does bundle Wealth Management inside this segment, which no doubt helped fuel larger earnings growth. But overall, loans are up 10% and deposits are up 8% on the commercial side.

The US segment of the business continues to perform well, with revenue up 8% year over year and net income up 15%. When we look to deposits and loans, they grew by 13% and 3%, respectively.

Overall, it was another solid quarter for the bank, and a continued reduction in provisions moving forward, plus strong activity in practically every segment of the business, could fuel earnings growth even further.

Key Performance Indicators

Of note, I won’t include the dividends in this quarter’s piece, as none of the banks raised them.

Valuations

The banks have had an outstanding year, and there is zero question they are on the expensive side of things. If you look to the chart above, you’ll notice that only Toronto Dominion is trading at a discount to its historical price-to-earnings ratio.

This is likely due to the company’s uncertainty moving forward with AML issues, plus the US asset cap putting it in the “penalty box” when it comes to valuations.

The bank’s have been consistently reporting lower-than-expected provisions for credit losses, which are ultimately helping earnings. In this regard, when we look to trailing price-to-earnings ratios relative to historical averages, what this tells me is the market is pricing in the fact these provisions will continue to come in softer.

In the simplest explanation possible, if provisions continue to trend lower, the banks “look” expensive right now, but I’d be of the opinion they’re likely fairly valued.

Where we could see some pressure on prices is if provisions escalate again.

For banks, my decision to buy/sell is purely based on the allocations inside my portfolio and the target I want to be at. I wouldn’t fuss too much about these companies from a valuation perspective. Simply buy them and hold them long term. They are likely priced to perfection right now in terms of provisions, but overthinking it can lead to you making some mistakes.

Provisions For Credit Losses

You’ll notice one thing from the chart above. Quarter-over-quarter (meaning Q2 of 2025 versus Q3 of 2025) provisions decelerated among all banks. This is a main contributor to most all of the banks posting outstanding quarters and their share prices reacting positively.

When we look to some of the best performing banks on the year, they are the ones that are reporting declines in year-over-year provisions. Year to date, CIBC and BMO have been some of the best performers out of the Big 6, and when you look to YoY declines in provisions, this shouldn’t be all that surprising.

What I will say is to take a lot of this with a grain of salt. Most of the banks mentioned that provisions could easily escalate in the future, and with the recent GDP print Canada had, highlighting the economy is shrinking, we aren’t quite out of the woods yet.

As I mentioned above, bank valuations are certainly frothy right now, and future declines in overall provisions are certainly priced in already. Any acceleration in these numbers could bring volatility.

If you’re wondering why National had such a steep decline on a QoQ basis but a large increase year-over-year, a lot of the provisions from last quarter were because of its acquisition of Canadian Western.

There were really no large-scale standouts when it comes to provisions. Year-over-year numbers don’t really paint a good picture, the more important are sequential (this quarter compared to the quarter previous) and in this case, all of the banks are trending in the right direction, but warn it could change on a dime considering the macro environment.

Earnings Expectations

This is an interesting segment I include each quarter, which monitors the banks’ earnings expectations at the start of 2025 to what they’re expected to earn in Fiscal 2025 now.

What you will notice now is that pretty much every bank outside of Scotia has had some notable upgrades to earnings over the course of the year, with Royal and BMO being the largest.

For Royal, it is mostly large outperformance that has driven this increase in earnings expectations, while for BMO, it has been a reduction in overall provisions after a large escalation of them the year prior.

My overall thoughts on the Big 6

It was a great quarter from all institutions, but if I were to rank the banks from best to worst this quarter, it would look like this:

1. Royal Bank of Canada
2. Bank of Montreal
3. ScotiaBank
4. CIBC
5. Toronto Dominion
6. National

The fact the banks are continuing to drive returns in a rough macro-environment just makes me more bullish on them in the future when the economy eventually rebounds and we start to see some growth.

These stocks make great cornerstones of a portfolio, often providing market-matching (and even market-beating in particular cycles) returns with lower volatility.