In their latest Q3 earnings reports, five of the Big Six beat analyst expectations. Even more telling? Provisions for credit losses (PCLs) — the money banks set aside in case loans go bad — plunged from $1.8 billion last quarter to just $258 million this quarter. That’s a dramatic shift in tone and suggests Bay Street is breathing a little easier about the outlook for both Canada and the U.S.
What’s driving the improved mood?
- Resilient consumers: Canadians are still spending, even as tariffs and trade tensions loom.
- Stability in sight: Executives like BMO CEO Darryl White admitted their “uncertainty meter” is lower than six months ago.
- Easing credit risk: Lower PCLs show banks expect fewer loans to sour in the near term.
Why caution remains
But don’t pop the champagne just yet. The banking chiefs are quick to remind us we’re only in the “middle innings” of the trade war. A flare-up in tariffs, drawn-out negotiations over CUSMA, or unexpected geopolitical shocks could quickly swing sentiment back into the red.
As Morningstar DBRS analyst Carl De Souza put it: “Nobody’s out of the woods yet, but at this point in time things seem to have steadied a little bit. And people are cautiously optimistic.”
What to watch next
- Trade talks: Any change in U.S.-Canada tariff negotiations could swing bank forecasts.
- Bank of Canada moves: With three rate decisions left in 2025 (Sept 17, Oct 29, Dec 10), mortgage rates and lending costs could shift quickly.
- Q4 results: Another round of strong earnings could confirm this quarter wasn’t just a blip.
Why this matters for borrowers and investors
For Canadian homeowners and real estate investors, the banks’ optimism hints at a slightly clearer path ahead for lending conditions — at least in the short term. But with risk still on the horizon, flexibility and liquidity remain key.
At Lendworth, we understand how quickly markets can turn. That’s why our focus stays on asset-backed lending with conservative loan-to-value ratios and multiple exit strategies, designed to protect capital in both calm and stormy markets.
👉 Bottom line: The Big Six are breathing easier, but nobody’s betting the farm just yet. For borrowers, this means opportunities are opening up — but strategy and caution remain more important than ever.