Big Six Q2 earnings week: all six beat, five raised dividends, capital markets drive profits
Key Questions
How did the Big Six banks perform in their Q2 earnings?
All six banks beat expectations, with capital markets profits surging 27%. Credit stress is building overall, though TD's PCLs came in below expectations.
Which banks raised dividends after Q2 earnings?
Five of the six banks raised dividends, including RBC by 7%, TD to $1.12, BMO to $1.71, NA to $1.32, and BNS. RBC also announced a share buyback.
What are analysts saying about bank valuations post-earnings?
Multiple sources note overvaluation, with forward P/E ratios at 14.2-16x versus historical averages around 11x, implying 20-30% downside. Jefferies and Motley Fool highlight specific downside estimates for each bank.
What new risks could affect bank earnings and dividends?
CUSMA uncertainty from Carney's signals adds macro headwinds, while OSFI's cut to the DSB buffer to 3.0% effective Oct 31 provides some relief. A sluggish economy narrative persists despite some optimistic 2027 outlooks.
How do recent ETF and strategy notes view bank holdings?
ZWB:CA is rated Hold due to stretched valuations, while ClearBridge commentary reinforces steady-rate and strong performance themes without altering the cautionary stance.
Q2 earnings week complete: BNS, BMO, NA (Wed) and RY, TD, CIBC (Thu) all beat expectations. Capital markets profits surged 27%. Five of six banks raised dividends (RBC +7%, TD to $1.12, BMO to $1.71, NA to $1.32, BNS raised). RBC announced buyback. Credit stress building but TD's PCLs came in below expectations. Post-earnings analysis notes overvaluation (TD at 16x, CIBC 15.5x, yields below 4%), reinforcing trim-don't-sell. RY DCF intrinsic $172 vs $200. Jefferies has reiterated overvaluation: 15.3x forward P/E, 50% above historical average, P/B 2.6x, 20-30% implied downside. A 'sweet spot' article notes Fitch upgrade and resilient household credit supporting dividend safety, but PE at 14.2 vs historical 11.2 reinforces caution. OSFI cut DSB to 3.0% effective Oct 31. New risk: CUSMA uncertainty (Carney signals no signing) adds macro headwind for bank earnings and dividend growth. Today's reading included a BMO article expressing optimism for 2027, contrasting with the sluggish economy narrative but not changing the overall picture. A new contrarian article on RY uses an Excess Returns model suggesting 17% undervaluation at $351 intrinsic, far above the DCF estimate of $172, but does not shift the dominant overvaluation narrative. Also, Rosenberg argues BoC neutral rate is too high, opening door for cuts. Today's reading included ClearBridge Q2 commentary (reinforces strong performance and steady-rate thesis) and ZWB:CA article (Hold due to stretched valuations, reinforcing overvaluation). A Motley Fool article further reinforces overvaluation with specific downside estimates for each bank (RY -30%, TD -29%, etc.), providing concrete numbers for the trim-don't-sell stance. Today's reading (July 9) added no new information; a duplicate Rosenberg article was encountered.