Q2/26 Preview: Diversification Is a Virtue

Research evidence excerpt

Q2/26 Preview: Diversification Is a Virtue

May 12, 2026 | 18:38 ET~

Canadian Banks

Q2/26 Preview: Diversification Is a Virtue Canadian Banks

Sohrab Movahedi Analyst

sohrab.movahedi@bmo.com (416) 359-7157

Étienne Ricard, CFA Analyst

Bottom Line: etienne.ricard@bmo.com (416) 359-5296

Q2 earnings kicks off May 27 with BNS. We expect the benefits of the Canadian banks' Grace MacDonald, CFA Senior Associate

diversified business models will be on display again this quarter, with continued gracej.macdonald@bmo.com (416) 276-4635

revenue tailwinds (NIM and fee-revenue growth) balanced by muted loan growth and Alexander M. Ponte, CFA Associate

ongoing trade/geopolitical uncertainty; we forecast lower PCLs y/y (but remaining alexander.ponte@bmo.com (416) 317-4763

above through-the-cycle averages), reflecting large preemptive performing reserve Katy Chen, CPA* Associate

builds last year. Our forecasts call for cash operating EPS growth of ~19% y/y and katy.chen@bmo.com (416) 564-0615

expect dividend increases at BNS (+9%; annual review), NA (+5%), RY (+4%), and Legal Entity: BMO Nesbitt Burns Inc.

TD (+3%; the latter are all on semi-annual review). Current bank valuations sit at a BMO Capital Markets Corp.*

premium relative to historical averages, reflecting strong sector fundamentals and more

encouraging Canadian macroeconomic outlook. We maintain our constructive stance but 8,000 Banks

are increasingly selective, favouring banks with the clearest pathways to sustained ROE

7,000

and earnings durability relative to valuation. Our Outperform-rated names remain RY,

TD, NA, CM, and EQB. 6,000 10

5,000

Key Points 4,000 3,000 9876543210

We expect earnings drivers from Q1/26 to persist in Q2/26, including revenue Nov May Nov May