Canada’s three largest banks reported third-quarter earnings that surpassed profit estimates, with capital markets performance offsetting headwinds from trade tensions. Royal Bank of Canada (RBC) led the gains, posting adjusted earnings of C$4.28 per share, beating the C$4.08 consensus forecast. The bank’s capital markets net income rose 16% to C$1.54 billion, while wealth management profit climbed 32%. RBC’s return on equity reached 17.9%, the highest among its peers.
Toronto-Dominion Bank (TD) delivered the strongest earnings surprise, with adjusted earnings of C$2.77 per share compared with the C$2.47 average estimate. The bank’s wholesale banking segment net income surged 87%, while U.S. segment earnings increased 41%. TD’s shares rose 1% in early trading, while RBC and Canadian Imperial Bank of Commerce (CIBC) shares declined about 1%.
CIBC reported adjusted net income of C$2.73 per share, 20 Canadian cents above estimates, with capital markets income up 34%. The bank noted that tariff-sensitive borrowers represent less than 1% of its total loan portfolio, mitigating concerns over U.S.-Canada trade disputes. CIBC’s exposure to affected industries remains minimal, according to management.
Analysts attributed the outperformance to robust deal flow, elevated trading revenue amid market volatility, and a revival in U.S. and Canadian IPO activity. Canadian banks are now trading at forward earnings multiples of around 15 times, levels not seen since 2010. RBC’s valuation premium was justified by its ROE, which remains the highest in the sector, according to Jefferies analyst John Aiken.
Trade tensions between the U.S. and Canada intensified earlier this month after bilateral negotiations collapsed, prompting tariffs on select goods. TD Bank’s chief financial officer, Kelvin Tran, acknowledged the fluid situation, stating that the bank is closely monitoring the impact of tariffs and potential government responses. TD plans to expand its U.S. branch network by 100 locations by 2028, signaling confidence in cross-border growth despite policy uncertainty.
The banks’ strong capital positions and reserve buffers, built over the past two years, provided additional support during the quarter. RBC’s participation in SpaceX’s IPO underwriting syndicate underscored its diversified revenue streams and market influence.
