What You Need to Know Ahead of Big Canadian Bank Earnings Reports

Credit Card Debt and the Impact of U.S. Interest Rates Are In Focus

Key Points

Several of Canada’s banks will report earnings later this month, with Toronto-Dominion kicking off the cycle on Thursday.

Factors that affected U.S. bank earnings last month, such as uncertainty about when the Federal Reserve will cut interest rates, could also have a significant impact on Canadian banks’ earnings.

Like U.S. banks, Canadian banks’ credit losses could also increase, as credit card balances and liabilities have risen in recent months.

Several of Canada’s largest banks will report earnings over the rest of the month, with Toronto-Dominion Bank (TD) kicking off the cycle on Thursday, followed by others including Bank of Montreal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CM), and Royal Bank of Canada (RY).

In a note last Friday, analysts at Bank of America Securities maintained “buy” ratings on shares of Bank of Montreal and Royal Bank of Canada (RBC), while assigning “neutral” ratings on TD, Bank of Nova Scotia and Canadian Imperial Bank of Commerce.


Many investors remain cautious on bank stocks due to macroeconomic conditions, as the inflation and interest rate environment in the U.S. and elsewhere remains uncertain, the analysts wrote.

Interest rates, credit card uncertainty
With earnings from several of the largest U.S. banks last month, the Federal Reserve’s decision to postpone rate cuts until inflation reaches the central bank’s preferred level could create some uncertainty for this month’s Canadian earnings report, as well as estimates for the remainder of 2024.

“Market expectations for interest rate cuts have shifted substantially,” analysts at Canadian Imperial Bank of Commerce (CIBC) wrote in a note last Thursday. “The long-term high-rate scenario has become the high-probability scenario, particularly in the U.S.” CIBC analysts said, “On April 30, the market was expecting a 0-1 rate cut in the US by the September meeting, while expectations in Canada were still hovering around 1-2 rate cuts. We have revised our NIM (net interest margin) assumptions, particularly for F2025, to assume fewer rate cuts.”

The second hurdle that CIBC and Bank of America analysts wrote about is the rise in credit card balances, which is accompanied by higher default rates.

Recent data showed that a greater number of people are carrying credit card debt than at any time since 2011.

In Canada, CIBC analysts noted that recent research shows renters account for 60% of all outstanding non-mortgage debt but “account for nearly 85% of serious defaults,” indicating that those who own a home are more likely to be in a relatively secure financial position.

Acquisitions and Other Regulatory Hurdles
Bank of America analysts noted that several recent acquisitions by some Canadian banks will be a focus of attention for investors, as the institutions may provide new information on the integration process in their earnings reports, as well as other timing details for the systems mergers.

Analysts noted that RBC is likely to provide new information about its acquisition of HSBC Bank Canada, which was completed on March 28, in terms of the overall timeline for when the combination of the banks’ systems will be complete, and when HSBC will begin contributing to RBC’s financial performance.


At least one bank in the group, TD, also has another layer of regulatory concern that investors will be keeping an eye on for more details.

Earlier this month, The Wall Street Journal reported that the U.S. Department of Justice opened an investigation into whether the anti-money laundering (AML) practices of several banks, including TD, failed to prevent money laundering in several cases involving U.S. includes money related to illegal drug sales.

T.D. previously disclosed that it was the subject of investigations into its anti-money laundering policies, but not whether any of the investigations involved drug money. Investors will likely want more information about how long the investigations will take to resolve, as well as what impact they might have on T.D.’s business.

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