Canada’s largest banks capped off their fiscal year with robust earnings, collectively reporting a near-record $69.86 billion in annual profit, a significant increase from $51.27 billion the previous year. The fourth-quarter earnings season concluded Thursday with Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CIBC) releasing results that, like their peers, generally beat analyst expectations.
For the final quarter alone, the six banks earned a combined $16.45 billion, up from $14.73 billion a year ago, demonstrating resilience amid broader economic uncertainties.
The standout performance was fueled by booming capital markets and wealth management divisions. A year of record-high, albeit volatile, financial markets allowed the banks to reap substantial fees from advising corporate clients on deals and trading, and from managing assets for affluent investors.
“We benefited from a constructive backdrop, especially in capital markets,” said Kelvin Tran, Chief Financial Officer at TD Bank Group. The data underscores this strength: CIBC’s capital markets profit surged 58% year-over-year, Royal Bank of Canada (RBC) reported a 62% jump in the segment, and National Bank of Canada saw a 41% rise. Wealth management profits also climbed in tandem with rising markets and asset values.
Beneath the strong headline numbers, signs of strain emerged in retail banking, illustrating a growing economic divide. Elevated unemployment, hovering around 7%, and the ongoing impact of higher interest rates led most banks to increase provisions for potential loan losses on the consumer side and report tepid mortgage growth.
RBC Chief Executive Officer Dave McKay characterized this dichotomy as a “K-shaped economy,” where “more affluent consumers invest disposable income in growing markets, while less affluent consumers struggle with affordability.” Banks noted particular stress in regions like the Greater Toronto Area, where clients face a combination of job insecurity and significant “payment shocks” upon renewing mortgages at higher rates, leading to an uptick in delinquencies.
BMO executives also observed that these “overall conditions are definitely affecting mass consumers and particularly the lower end of the credit spectrum.”
Looking ahead, bank executives struck a note of cautious optimism mixed with realism. RBC’s Chief Risk Officer, Graeme Hepworth, warned that “retail losses are expected to remain elevated in 2026,” citing lagging effects from higher unemployment and mortgage renewals. BMO anticipates only low single-digit loan growth in Canada for the coming year.
In response to this bifurcated environment, strategic priorities are sharpening. Banks are aggressively competing for high-margin, affluent clients while continuing to expand their U.S. footprints.
“Our first strategic priority is to grow our mass affluent and private wealth franchise,” stated Christian Exshaw, CIBC’s new CEO. BMO, meanwhile, is focused on optimizing its expanded U.S. network following its major acquisition, with CEO Darryl White emphasizing that any further decisions will be evaluated through the lens of improving return on equity.
In summary, Canada’s major banks have demonstrated formidable profitability powered by their global capital markets operations. However, their earnings reports also serve as a stark reflection of the domestic economic landscape, where the challenges facing everyday consumers are becoming increasingly distinct from the fortunes of the wealthy and corporate clients—presenting a key strategic balancing act for the sector moving forward.
