Canadian Banks Brace for Loan Losses Amid Trade Uncertainty

Canadian banks are expected to increase their loan loss reserves in the second quarter due to trade uncertainties. Four of the big six banks are predicted to set aside over C$1 billion to protect against potential loan defaults. This move comes as a high interest rate environment makes it harder for consumers and businesses to repay loans. Bank of Montreal and TD Bank are projected to see a fall in profit. However, the other four banks are expected to experience an average earnings growth of 7.9%. U.S. President Donald Trump's tariff policies have introduced significant uncertainty into the global economy, impacting financial markets. Analysts anticipate a rise in allowances on regularly repaid loans, reflecting a deteriorating economic outlook. Provision for credit losses is expected to have grown significantly at the big six Canadian banks in the second quarter, although still lower than during the COVID-19 pandemic. Royal Bank of Canada is likely to show the biggest rise in net income, benefiting from its scale and the absorption of HSBC Canada.