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Executives at two of Canada\u2019s largest banks that reported better-than-expected third-quarter earnings on Tuesday say the country\u2019s economic situation is gradually improving, though still uncertain due to the tariffs. <\/p>\n
\u201cEarlier this year, my uncertainty meter was very high,\u201d <\/p>\n
Bank of Montreal<\/p>\n
chief executive Darryl White said during a call with analysts. \u201cToday, it\u2019s less high.\u201d <\/p>\n
He said there were questions about what the Canadian government would look like early this year, \u201clet alone who the leader might be of the Liberal Party\u201d and the policy that would flow from it, and there wasn\u2019t \u201cmuch of a handle\u201d on the direction of the United States policy. <\/p>\n
\u201cWe have got a better one today,\u201d he said. <\/p>\n
Still, there are geopolitical issues and uncertainty about Canada\u2019s future trade deal with the U.S. <\/p>\n
\u201cWhen I add it all up, it doesn\u2019t mean that all the uncertainty has gone away,\u201d he said. \u201cIt\u2019s just that the meter has gone down and, therefore, the confidence in the outlook today is one that is just a little easier to call than it was six months ago.\u201d <\/p>\n
Phil Thomas, Bank of <\/p>\n
Nova Scotia<\/p>\n
\u2018s chief risk officer, said credit card spending data suggests discretionary spending is improving and that there are \u201csome green shoots\u201d coming. <\/p>\n
He said there are still signs of stress, particularly amongst younger clients, but retail sales were up in the second quarter. <\/p>\n
\u201cFrom a Canadian consumer health perspective, it\u2019s really mixed right now,\u201d he said during Scotiabank\u2019s call with analysts. \u201cWe are cautiously optimistic about the outlook.\u201d <\/p>\n
For now, White said the Canadian economy is in the \u201cmiddle innings,\u201d weaving through a modest growth environment. <\/p>\n
\u201cThe economy is sort of moving at a pace that you\u2019d expect,\u201d he said. \u201cIt\u2019s neither robust, nor does it feel recessionary in Canada, and you\u2019ve got some segments that will naturally slow down when that happens.\u201d <\/p>\n
BMO and Scotiabank were the first two of the <\/p>\n
Big Six banks<\/p>\n
to report their earnings that cover the three months ending July 31. <\/p>\n
Their earnings are often considered a signpost of the country\u2019s economy and both banks reported higher profits and beat analysts\u2019 expectations. <\/p>\n
But given the uncertainty surrounding tariffs, analysts are closely monitoring provisions for credit losses (PCLs), the reserves lenders set aside to address potentially problematic loans, which is a key metric for measuring the health of a bank\u2019s loan book as well as the ability of households and businesses to pay their debts. <\/p>\n
Both BMO and Scotiabank reported lower PCLs than expected, which helped boost their earnings. BMO\u2019s total PCLs were $797 million, compared to $906 million a year ago, while Scotiabank\u2019s total PCLs were around $1 billion, a decrease of about $11 million compared to the same quarter a year ago and a drop of about $357 million from the second quarter of 2025. <\/p>\n
\u201cWhile we are encouraged by our credit performance this quarter, the operating environment remains challenging,\u201d Thomas said. \u201cIn Canada, the lack of a trade deal with the U.S. and recent mixed macroeconomic results continue to add uncertainty to our near-term outlook.\u201d <\/p>\n
BMO\u2019s net income for the three months ending July 31 was $2.33 billion, compared to $1.86 billion during the same period a year ago, resulting in net earnings per share of $3.14. <\/p>\n
The bank\u2019s adjusted net income \u2014 which removes the impact of non-recurring items \u2014 was $2.39 billion, compared to $1.98 billion a year ago, resulting in adjusted earnings per share of $3.23, which was above analysts\u2019 expectations of about $2.97 per share. <\/p>\n
John Aiken, an analyst at Jefferies Inc., said BMO\u2019s \u201cstrong beat\u201d should receive an \u201cinitial warm reception\u201d by investors, but the bank appears to have modestly missed expectations for most of its business segments except for U.S. retail. <\/p>\n
\u201cThe bulk of the better-than-expected results came from lower-than-forecast provisions,\u201d he said in a note on Tuesday. \u201cWe view the quality of earnings as being not as high as we had originally anticipated and, along with negative loan growth in the U.S., we anticipate that we could potentially see stronger earnings from BMO\u2019s peers.\u201d <\/p>\n
Mike Rizvanovic, an analyst at Scotiabank, said in a note that BMO\u2019s headline beat could move consensus expectations a bit higher for fiscal 2026. <\/p>\n