Fitch maintains neutral outlook for Canadian banks in ’25

Fitch Ratings has maintained a neutral sector outlook for Canadian banks in 2025, citing strong financial profiles, stable funding, and solid capitalisation among the federal systemically important banks (D-SIBs).

Profitability is expected to remain flat as improved margins and lower funding costs are offset by weak loan growth amid a sluggish economic recovery and high household debt burdens.

Moreover, Fitch anticipates a slight rise in consumer loan impairments as pandemic-era mortgages reprice, but D-SIBs are well-positioned to absorb higher credit costs due to robust reserves.

Increased scrutiny from regulators will drive a focus on operational risk, compliance, and cultural risk management, potentially raising costs in 2025. However, diversified business models may help mitigate headwinds in commercial lending.

Attribution: Fitch Ratings

Subediting: M. S. Salama