Banks earnings season comes to a close

Canadian lenders are still feeling the effects of high interest rates on earnings, but more deal-making helped offset losses — even as the mean ol’ Bank of Canada waits to cut rates.

Driving the news: The capital markets arms at banks rebounded. Private equity firms in Canada invested $4 billion last quarter, almost double the amount seen in Q1 of last year. Meanwhile, the total value of mergers and acquisitions in March was the second-highest month since June 2023.

Big picture: All in all, five of the Big Six banks beat expectations for profits, with BMO the lone lender failing to do so thanks to loan loss provisions that greatly outstripped estimates — though all banks have been putting more cash aside this year to guard against potential defaults. 

Bottom line: The Big Six control over 90% of Canada’s banking market, so their continued financial health is intertwined with the health of the entire system. While CEOs are praying for rate cuts, these earnings show that banks have been able to adapt to a degree.—QH