Canadian Banks: Previewing the preview: Like nothing changed

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Canadian Banks

Previewing the preview: Like nothing

changed

Industry Overview

EPS momentum running into a high bar

02 August 2026

Canadian banks enter 3Q results (08/25) well owned, up 9% since pre-2Q and trading at

premium valuations vs. history and US peers. While strong flows and EPS momentum

have continued to outweigh valuation concerns, investors will need validation on the

macro (potential investment super-cycle, manageable US trade negotiations) and micro

(credit stabilization, margin expansion, growth green shoots). We expect another quarter

of EPS beats. The bigger question is whether management commentary can drive the

next leg higher (or enough to mitigate a sell-the-news reaction).

Equity

Canada

Banks-Multinational/Universal

Our View: You want exposure to the group

We believe investors should want to maintain exposure to the idiosyncratic Canada story

underpinned by an improving domestic growth outlook under PM Mark Carney and a

banking sector that remains well positioned to convert that growth into higher returns.

Banks also remain focused on optimizing capital and operational efficiency (including AI

deployment). Many global investors increasingly view Canada as better positioned to

execute a growth-oriented policy agenda relative to several Western European

economies, driving investment flows. TD stands out as having the most visible self-help

opportunity set, though we see the entire group as well positioned to benefit. We

reiterate our Buy ratings on Royal (RY), National (NA) and CIBC (CM).

Ctrl C + Ctrl V…except credit

Our conversations with IR teams over the last few days suggest a remarkably similar

fundamental backdrop to 2Q. We expect EPS beats, driven by stronger capital markets

activity (despite limited direct exposure to Asia, equities prime brokerage—both boosted

trading revenues for US banks) and wealth revenues. More notably, the tone around

credit quality appears to have improved, “too soon to release reserves, but expect PCLs

to track as expected” versus “the macro has deteriorated from earlier in the year” back

in April.

Margin expansion has room to run

…