BMO Forecasts Canadian Banks' Q3 Performance

BMO previews Canadian banks' Q3 performance, with Royal Bank of Canada's personal and commercial banking operations, wealth management, and capital markets expected to drive growth. The bank's insurance business is also expected to contribute to revenue. Overall, BMO expects Q3 to be a strong quarter for Canadian banks, with improving loan growth and solid earnings momentum.

Canadian bank stocks have shown resilience in the face of economic concerns, with analysts expecting a robust third-quarter performance. Royal Bank of Canada (RBC) is particularly highlighted for its expected strong growth in personal and commercial banking, wealth management, and capital markets. BMO analyst Matthew Lee anticipates that the sector will benefit from a sequential decline in loan-loss provisions and improved loan growth.

RBC's quarterly revenue reached $32.57 billion, a significant increase from $13.98 billion last year, with net profit surging to $4.39 billion from $3.95 billion [1]. The bank's insurance business is also expected to contribute to revenue growth. RBC recently declared a quarterly dividend of $1.54 per share, an increase from the previous $1.48 per share, with a payout ratio of 49.49% [1].

Analysts from Canaccord Genuity, Desjardins, Jefferies Financial Group, and Scotiabank have maintained a "Buy" rating for RBC, with target prices ranging from C$193.00 to C$207.00 [1]. The consensus rating among analysts remains "Buy" with an average target price of C$189.62 [1]. Despite positive analyst sentiment, corporate insider activity indicates negative sentiment, with an increase in insiders selling their shares [1].

The Canadian banks are expected to report lower loan-loss provisions in the third quarter, reflecting a manageable trade scenario [2]. BMO and Scotiabank are expected to kick off earnings season on Tuesday, with other big six banks following suit. Net interest income is expected to grow between 9.3% and 57% [2].

National Bank analyst Gabriel Dechaine expressed concerns about the disconnect between bank valuations and economic trends, noting that while the sector has outperformed the wider market, the pricing relies on an economic turnaround that is far from guaranteed [3]. Despite these concerns, Dechaine does not expect a significant negative swing in the third quarter.

In summary, Canadian banks are set to report strong third-quarter results, driven by improved loan growth and solid earnings momentum. RBC, in particular, is expected to perform well, with positive analyst ratings and strong financial performance.

References:
[1] https://www.ainvest.com/news/canaccord-genuity-maintains-buy-rating-royal-bank-canada-201-price-target-2508/
[2] https://www.reuters.com/business/finance/canadian-banks-dodge-worst-case-tariff-scenario-latest-earnings-2025-08-25/
[3] https://ca.finance.yahoo.com/news/banks-head-q3-results-high-080009388.html