Fitch: Canadian Big Banks Well Positioned to Face Macro Headwinds After Strong 2025

Strong 2025 performance indicates Canadian banks are poised to face ongoing trade and economic challenges.

The Canadian banking sector is set to encounter an array of macroeconomic challenges in the coming year. However, Fitch Ratings states that the latest financial results from the country’s largest institutions indicate they are robustly prepared to weather the storms ahead.

Fitch reported that the Big Six banks all posted strong results for the fiscal year ended October 31, 2025, with aggregate revenues up 15% year-over-year, and fourth-quarter revenues increasing by 10% from the same quarter in 2024.

“Canadian banks ended 2025 on a strong note driven by broad-based volume growth, margin expansion, record fee income and constructive market conditions,” Fitch noted in its new report.

Strong Loan Growth Led by Mortgages

The banks reported solid growth in both loans and deposits. Mortgages were the primary driver of the increase in lending volumes, a trend occurring amid interest rate cuts from the Bank of Canada. Conversely, some banks did observe a decline in commercial lending volumes.

• Credit Quality: Credit loss provisions were either stable or declined in the quarter, with Fitch noting that “most banks reporting lower impaired provisions reflecting better credit performance and slower migration rates.”

• Fee Income and Wealth: The banks’ fee income streams remained healthy. “Wealth management posted robust earnings due to higher fees and significant increases in assets under management (AUM),” Fitch said. Capital markets also saw strong activity in M&A/advisory, trading, and underwriting.

• Capital Strength: The banks’ capital levels “remain robust,” with the median Common Equity Tier 1 (CET1) ratio stable at 13.5%. This provides a 200 basis point buffer above regulatory minimums, which Fitch views as prudent given the current economic environment.

2026 Outlook: Deteriorating Sector View

Looking ahead, Fitch anticipates that the banks will face headwinds throughout 2026, primarily due to ongoing trade tensions with the U.S. and persistent uncertainty regarding future trade negotiations between the two countries. Given these macro challenges, the rating agency maintains a “deteriorating” outlook for the sector.

Despite this sector outlook, most banks are currently forecasting mid-single-digit loan growth in 2026 and expect credit provisions to remain stable.

Fitch concluded: “Efficiency remains a focus across the banks, with continued investment in technology, AI adoption, and cost discipline. All the banks have positive operating leverage targets for next year.”