Large Canadian Banks Q3 2024 Earnings Round-Up: Variance in Credit Performance Drives Mixed Results

Credit deterioration progressed with impaired provisions for credit losses (PCL) up 3.5% sequentially, representing nearly 90% of total PCL in Q3 2024. On September 4, 2024, the Bank of Canada (BOC) continued its monetary policy easing cycle with its third consecutive 25-basis-point (bp) cut to its overnight rate, now at 4.25%. Although not immediate, these interest rate reductions will provide some much-needed relief to heavily indebted Canadian consumers and businesses that continue to be pressured by notably higher debt servicing costs.

Key highlights include:
-- Q3 2024 sequential adjusted earnings increased 4% on higher net interest income, which more than offset higher provisions for credit losses and noninterest expenses.
-- There was variation in the Big Six's credit performance in Q3 2024. While the credit cycle has not likely reached its peak and challenges remain, recent and anticipated future interest rate cuts provide potential relief on the horizon.
-- Monetary policy easing cycles in Canada and the U.S. may provide a boost to muted loan growth in what remains a challenging operating environment. The Big Six, however, continue to maintain sound liquidity and adequate capital levels.

"Capital levels at the Big Six remained relatively stable and provide sufficient cushion to weather a more adverse operating environment and absorb potential losses, with the aggregate CET1 ratio at 13.1% in Q3 2024," said Carl De Souza, Senior Vice President, North American FIG. "The Big Six all maintain adequate capital buffers above the CET1 regulatory minimum threshold of 11.5%, and we anticipate they will sustain CET1 ratios above 12.5%."