Royal Bank of Canada, TD Bank and CIBC posted quarterly profits that outstripped estimates, helped by robust capital markets activity and higher fee revenue, the banks said on Thursday. Their results complete a third-quarter reporting cycle in which Canada’s six largest lenders all topped Bay Street profit forecasts, even as geopolitical frictions and tariff measures complicated the backdrop for cross-border trade.
The banks have spent recent years reinforcing their capital positions, accumulating reserves for potential credit losses and generating steady earnings, steps managements say make them better able to manage economic and trade-related uncertainty. At the same time, they have broadened operations beyond domestic lending and increased fee-based services such as wealth management and investment banking to diversify revenue.
"These results reflect three forces working together: diversified business model, strong client activity, and a favorable market backdrop," RBC CEO Dave McKay told analysts.
Trade tensions and reserve posture
Trade relations with the United States deteriorated this month after talks toward a bilateral agreement fell apart. In response, the United States imposed tariffs on certain Canadian goods, and Canada retaliated with duties on U.S. steel and aluminum. Bank executives said they are monitoring the fallout closely.
TD Bank’s chief financial officer, Kelvin Tran, said in an interview that the bank feels comfortable with its reserve levels but acknowledged the situation remains fluid. "I feel very comfortable with the reserve we have... the situation is still quite fluid, we have to look at the specifics of the tariffs, how long it lasts, the detail of (the government) responses," Tran said.
CIBC noted that the businesses most sensitive to tariffs account for less than 1% of its total loan book. RBC signaled optimism about possible increases in foreign direct investment and newly established trade relationships for Canada.
Capital markets drive growth
Across the reporting banks, capital markets units benefited from heightened deal flow, stronger trading revenues tied to market volatility, and renewed activity in IPO markets in the U.S. and Canada. RBC reported a 16% rise in capital markets net income to C$1.54 billion ($1.11 billion), and also saw profit in its wealth management division climb 32%.
CIBC said capital markets income increased 34%, a result that was aided by lower loan loss provisions. TD reported particularly large gains in its wholesale banking operations - a segment that includes capital markets and corporate and investment banking - recording an 87% jump in net income. TD’s U.S. unit also produced a 41% rise in net income, and the bank reiterated a plan to open 100 new branches in the region by 2028.
Valuation and market reaction
Canadian banks are trading at roughly 15 times forward earnings on average, the highest level since 2010, and have outperformed the broader Toronto Stock Exchange. Jefferies analyst John Aiken highlighted RBC’s return on equity as a justification for its valuation premium. "Its (RBC) valuation premium was once again justified by its impressive return on equity (ROE)," he said, citing a 17.9% ROE that exceeded the bank’s target.
Aiken also noted the relative strength of TD’s quarterly performance: "To close out third-quarter earnings, TD produced the strongest beat of the quarter," he said.
Market moves after the reports were mixed. Shares of RBC and CIBC were down about 1%, while TD’s stock rose roughly 1% on the day. CIBC’s adjusted net income came in at C$2.73 per share, 20 Canadian cents above analysts’ estimates. RBC reported earnings of C$4.28 per share, beating the C$4.08 forecast. TD posted adjusted earnings of C$2.77 per share, above the average analysts’ estimate of C$2.47.
What this means for stakeholders
For depositors and corporate clients, the stronger capital positions and elevated reserves signal greater readiness to absorb potential credit stress. For investors, the banks’ diversified revenue - increasingly weighted toward wealth management and capital markets - is underpinning profitability and valuation multiples. For employees and branch networks, TD’s expansion plans in the U.S. indicate continued investment in growth outside Canada.
Currency disclosure: $1 = 1.3883 Canadian dollars.