Canadian Medium-Size Banks F2025 Outlook: Resilient Credit Fundamentals Despite Some Headwinds to Asset Quality

Our overall F2025 credit rating outlook for Canadian Medium-Size banks (MSBs) is stable. The Bank of Canada's monetary policy easing cycle should help lower debt-servicing costs for heavily indebted consumers and businesses.

Key Highlights:
-- We predict an overall stable F2025 credit rating outlook for Canadian MSBs because we expect a moderation in PCL and a generally positive economic growth outlook in Canada to result in improved earnings in F2025
-- Asset quality metrics will likely experience some residual deterioration heading into F2025, before moderating in the second half of the same fiscal year
-- Good earnings generation and sound balance sheet fundamentals, including sufficient capital buffers, will allow the MSBs to absorb higher loan losses.

According to Shokhrukh Temurov, Vice President, North American Financial Institution Ratings, "Although a generally positive economic growth outlook for Canada should be supportive of improved bank earnings in F2025, we remain mindful of geopolitical risks and heightened policy uncertainty, which could create volatility and affect economic forecasts."