Canada’s big banks set to report strong results again, but questions about valuation remain

Canada’s biggest banks are once again expected to post strong results when they report their third-quarter earnings next week, but to what extent their profits can boost their stocks is another thing.

Like the previous quarter, a strong performance in the banks’ capital markets business segments will likely play a key role in boosting the profits of the Big Six , which begin reporting their results on Tuesday.

Canada’s financial sector raised about $376 billion through 586 deals in the first six months of 2026, up 21.5 per cent from the $309.3 billion raised in the same period last year, according to Financial Post Data. The strong start puts the sector on track to surpass the $597 billion recorded in all of 2025, the highest annual total since 2010.

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The provisions for credit losses (PCL), the money banks keep aside to tackle loans that may potentially go bad, will also be closely watched, but analysts don’t expect them to be a major issue.

“Credit remains stretched, but manageable,” Matthew Lee, an analyst at Canaccord Genuity Corp., said in a note on Tuesday. “The consumer continues to be somewhat challenged in Canada, with stubborn unemployment and limited economic growth likely to weigh on PCLs for the remainder of the year.”

He doesn’t expect credit to be an “impediment to double-digit earnings-per-share growth” in the near term.

But despite expectations for a positive third quarter, questions about whether bank stocks are overvalued continue to be a discussion point among analysts because a key metric that measures valuations suggests the lenders are trading at historical highs.

For example, the large Canadian banks’ ratio of average price to expected earnings in mid-August was 16, which is well above the historical average of 11.3.