Mixed Q2 for Big Six banks: Fitch

The Big Six banks had mixed second quarter results, with weaker revenues and profits, but improved credit conditions, says Fitch Ratings.

In a new report, the rating agency said that aggregate revenues were down by 3% for the big banks and Desjardins Group, and adjusted net income was down by 5% from the same quarter a year ago.

In part, the decline in revenues reflected a shorter quarter, which had three fewer days than the previous period. Canadian personal and commercial banking revenue declined by 3%, “driven by the shorter quarter, despite overall supportive net interest margin trends and modest volumes,” Fitch said. 

Overall, loan growth “was modest but positive” Fitch said — aggregate gross loans were up 1% in the quarter. Personal and commercial lending was flat, it noted, while wholesale lending was up 3% in the quarter. 

“Banks actively managed their unsecured consumer credit, because the economy remains weak due to uncertainty from ongoing tariff negotiations,” it said. “Most banks have guided to mid-single digit loan growth in 2026.”

At the same time, international banking revenue, including U.S. banking, was down by 5%, capital markets revenue dipped by 4%, and wealth management held up best, but still declined 2% from the same quarter a year ago. 

For the capital markets, the weakness stemmed from softer trading revenues, which were down by 18% in the second quarter. That was partly offset by “a relatively healthy quarter for advisory and investment banking,” Fitch noted.

Alongside the weaker aggregate revenues, expenses declined on a quarter-over-quarter basis across most of the banks — which also reflected the shorter quarter, it noted. 

“Positive operating leverage remains a sector-wide theme,” Fitch said.

As for credit conditions in the quarter, provisions for credit losses (PCLs) improved by 2%, it said — noting, “the credit picture slightly improved from the linked quarter, primarily driven by performing loan recoveries/releases as [first quarter] tariff-related macro provisions moderated.”

Most of the banks maintained their guidance on credit loss provisions for the rest of 2026, Fitch said, which it expects to be in a “similar range to 2025.”

However, the median gross impaired loan ratio rose to 0.90% from 0.86%, quarter-over-quarter. 

“Impaired loan trends show gradual normalization in consumer portfolios, as unsecured consumer (particularly cards and personal lending) continues to experience migration, while commercial credit was broadly stable,” it said.

Additionally, most of the banks reported an improvement in deposit margins, “due to product mix shifts,” Fitch said, “with an ongoing structural shift from higher-cost term deposits toward transactional and savings accounts, which Fitch expects to be supportive of deposit margin expansion over the medium term.”

Aggregate deposits were up 2% on average, it reported. 

The banks’ capital positions remain strong, Fitch said, with the median common equity Tier 1 ratio at 13.5% in the second quarter. 

“This implies a 200 [bps] buffer above regulatory minimums, which Fitch views as prudent in the current economic environment,” it said. “Banks continue to prioritize capital deployment for organic growth opportunities, followed by share buybacks, with most banks increasing dividends for the quarter.”