BMO Analyst Predicts Flat Earnings for Big 5 Banks, Recommends CM, NA, and RY; AI Initiatives Struggle to Deliver ROI; FDI Flows into Canada Turn Positive.

BMO bank analyst Sohrab Movahedi has presented top picks for the upcoming earnings season, with a focus on Canadian banks such as CM, NA, and RY. CIBC analyst Stephanie Price highlighted the importance of effective AI deployments for enterprise solutions and noted that megacap tech's lead in the US market may be driven by AI-related hype. BMO chief economist Doug Porter observed a shift in foreign direct investment in Canada, with a net inflow of $21 billion in the past four quarters, reversing 11 consecutive years of outflows.

In the upcoming earnings season, Canadian banks such as Bank of Montreal (BMO), Bank of Nova Scotia (BNS), and Royal Bank of Canada (RY) are expected to report financial results that reflect a decline in loan-loss provisions, driven by a less severe impact of U.S. tariffs than initially feared [1]. BMO analyst Sohrab Movahedi has presented top picks for the season, highlighting the importance of these trends.

Canada's big six banks are expected to set aside a total of C$5.22 billion in loan-loss provisions for the third quarter, compared to C$6.37 billion in the second quarter, according to data compiled by LSEG [1]. This reduction is attributed to the fact that about 92% of Canadian exports by value entered the U.S. tariff-free in June [1].

Analysts expect net interest income, the difference between what banks make on loans and pay out on deposits, to grow between 9.3% and 57% [1]. Additionally, the banks' capital markets and wealth management segments are expected to benefit from fee income and rising demand [1].

CIBC analyst Stephanie Price has noted the importance of effective AI deployments for enterprise solutions. She observed that megacap tech's lead in the U.S. market may be driven by AI-related hype, suggesting that AI is a significant factor in the current tech landscape [2].

BMO chief economist Doug Porter has observed a shift in foreign direct investment in Canada, with a net inflow of $21 billion in the past four quarters, reversing 11 consecutive years of outflows [2]. This shift indicates a growing interest in Canada's economic environment and potential for growth.

Meta's Q2 2025 earnings report, driven by AI-optimized ad systems, has demonstrated the strategic rebirth of the tech giant. The company's AI flywheel model has reinvested ad revenue into infrastructure, boosting ad performance and driving significant revenue growth [2]. This AI-driven transformation has shifted investor sentiment towards optimism, with the company's stock rising 34% in 2025 [2].

In conclusion, the upcoming earnings season for Canadian banks and the strategic rebirth of tech giants like Meta highlight the importance of AI deployments and effective capital management. Investors should closely monitor these trends as they shape the future of the financial and tech sectors.

References:
[1] https://www.reuters.com/business/finance/canadian-banks-dodge-worst-case-tariff-scenario-latest-earnings-2025-08-25/
[2] https://www.ainvest.com/news/meta-ai-driven-ad-resurgence-strategic-rebirth-era-tech-investing-2508/