Canada's top banks are set to report their earnings this week. Here's what to know
An array of issues ranging from a potential increase in provisions for credit losses (PCL) and the impact of the Bank of Canada’s rate cuts on loans to money laundering troubles are likely to dominate discussions this week and next as Canada’s top banks release their earnings.
Among the Big Six, Toronto-Dominion Bank will be the first to release its earnings on Aug. 22, followed by the rest of the group next week.
Most analysts expect the banks to report positive numbers, but some concerns remain as the provisions for credit losses, or the money that banks need to keep aside to tackle potential credit losses, are likely to have increased.
Analysts expect the Bank of Montreal in particular to be affected as one of its customers in the United States declared bankruptcy. This could have an “outsized impact” on BMO’s credit loss provision in the second half, according to Matthew Lee, an analyst at Canaccord Genuity Group Inc.
“Our key focus for the quarter will be on credit as pressure mounts from both commercial and personal banking customers,” Lee said in a note on Aug. 13.
He expects BMO’s PCL to increase by 56 per cent year over year to $768 million, which could be a “risk” to growth expectations.
Gabriel Dechaine, an analyst at National Bank of Canada, increased the sector’s expected PCL ratio, which measures the provision for credit losses as a percentage of net loans, to 47 basis points from 45 for the sector due to “rising insolvencies in Canada, potential commercial impairments and losses in some consumer categories (e.g., auto).”
Aria Samarzadeh, an analyst at Jefferies Securities Inc., forecasts the total PCL will rise by 2.4 per cent in the third quarter from the second quarter and 25.9 per cent from the same
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