DAX Expected to Open Lower Amid US Consumer Sentiment and Inflation Concerns

The DAX is expected to open lower on Tuesday, according to bank and broker estimates. The index closed 0.4% lower on Monday at 24,273 points. Investors are awaiting consumer sentiment data from the US, which is expected to have weakened in August. The Conference Board's consumer confidence index is forecast to drop to 96.4, down from 97.2 in July.

Canadian banks are set to report their fiscal Q3 earnings, with analysts expecting lower provisions for loan losses and weak loan growth. The reduced loan-loss provisions are largely attributed to the less severe impact of U.S. tariffs on their loan portfolios, compared to initial fears [1]. This trend is expected to continue, with analysts projecting a sequential decline in provisions from C$6.37 billion in the second quarter to C$5.22 billion in the third quarter [2].

While the lower provisions suggest a healthier loan portfolio, loan growth remains a concern. Analysts anticipate weak loan growth due to low demand, a trend that has been consistent despite the easing of tariffs [1]. This is particularly evident in the capital markets and wealth management segments, where the banks are expected to benefit from fee income and rising demand, offsetting the weak loan growth [2].

The Canadian banks, traditionally known for their robust capital positions, are expected to deploy their excess capital through stock buybacks. In the third quarter alone, the banks have cumulatively deployed about C$4 billion in stock buybacks [2]. This strategy reflects the banks' limited options to invest at home due to a saturated market and their focus on expanding in the U.S. and building their wealth management business.

Key earnings estimates for the five major Canadian banks include:
- Bank of Nova Scotia (BNS): Non-GAAP EPS estimated at C$1.73, with net interest income rising by 11.26% Y/Y to C$5.41B [1].
- Bank of Montreal (BMO): Non-GAAP EPS estimated at C$2.96, with credit loss provision standing at C$917.79M [1].
- Royal Bank of Canada (RY): Non-GAAP EPS estimated at C$3.29, with credit loss provision at C$1.07B [1].
- Toronto-Dominion Bank (TD): Non-GAAP EPS estimated at C$2.03, with net interest income at C$8.49B and provision for loan losses at C$1.21B [1].
- Canadian Imperial Bank of Commerce (CM): Non-GAAP EPS estimated at C$2.00, with credit loss provision at C$571.60M [1].

Investors and financial professionals are advised to closely monitor the banks' commentary on capital deployment plans, which could provide insights into their medium-term financial strategies [2].

References:
[1] Seeking Alpha. (2025). Canadian Banks FQ3 Earnings Preview: Lower Provisions, Weak Loan Growth Expected. Retrieved from https://seekingalpha.com/news/4488926-canadian-banks-fq3-earnings-preview---lower-provisions-weak-loan-growth-expected
[2] Reuters. (2025). Canadian Banks Dodge Worst-Case Tariff Scenario in Latest Earnings. Retrieved from https://www.reuters.com/business/finance/canadian-banks-dodge-worst-case-tariff-scenario-latest-earnings-2025-08-25/