Investors in Canada91裸聊视频檚 major banks will be looking for signs of loan growth, impacts of the Delta variant and hints of what the Big Six may do with their cash reserves when they report this week.

The banks are widely expected to further unwind the record-breaking amounts of money they set aside last year 91裸聊视频� at least $16.5 billion across the Big Six 91裸聊视频� to cover widespread loan defaults that never materialized.

Shareholders, however, have already largely factored in the earnings boost from the reserve winddown, as was already seen in U.S. bank earnings last month, said James Shanahan, senior equity research analyst for North American financials at Edward Jones.

91裸聊视频淚n some cases there were earnings beats of 10, 20, 30 per cent, and the stocks were down. So the market clearly isn91裸聊视频檛 going to reward the Canadian banks if they deliver huge earnings beats and it91裸聊视频檚 just simply related to reserve releases.91裸聊视频�

Loan growth will be a key area to watch as the economy reopens. Many people and companies have used extra cash during the pandemic to pay down debts, putting pressure on a key area for the financial sector.

Canadian bank lending hasn91裸聊视频檛 been hit as hard on loans as the U.S. though, thanks largely to residential mortgage lending that drives about two-thirds of Canadian bank loan portfolios, Shanahan said.

The mortgage business has been brisk in Canada this year as both home sales and prices spiked, which has benefited the banks but has also increased concerns about household debt.

The Bank of Canada said in a financial review in May that high household debt and imbalances in the housing market both intensified over the past year.

91裸聊视频淭he housing market boom and the corresponding rise in mortgage debt support economic growth in the short term but increase the risk to the Canadian economy and financial system over the medium term.91裸聊视频�

Debt levels also prompted Fitch Ratings Inc. in July to downgrade its rating on the operating environment for Canadian banks by a notch to reflect 91裸聊视频渆levated levels of private and public sector indebtedness, which Fitch views as negative for long-term credit conditions and business volumes.91裸聊视频�

Nigel D91裸聊视频橲ouza, a financial services investment analyst at Veritas Investment Research, said overall debt levels are a potential concern, but the monthly carrying costs of those debts is the more important factor.

91裸聊视频淚t91裸聊视频檚 a potential risk, but until interest rates start to move higher, and the cost of servicing those debts start to move higher, I don91裸聊视频檛 think you91裸聊视频檙e going to see it translate to any credit risk.91裸聊视频�

The more immediate headwind for banks could be slowing activity on the capital markets front, D91裸聊视频橲ouza said. Banks have seen a boost to trading revenue, as well as underwriting and advisory fees as more companies raise money and make public offerings in what has been elevated market activity in general.

Capital markets revenue could fall by seven per cent, quarter over quarter, estimates CIBC analyst Paul Holden, which will help push down overall earnings per share by an estimated average of 2.5 per cent from the previous quarter.

91裸聊视频淭ransaction volumes for equities, derivatives and fixed income all point to lower trading revenue,91裸聊视频� Holden said in a note.

Looking ahead, the other big unknown for banks is the question of dividend increases and share buybacks, which were banned byCanada91裸聊视频檚 banking regulator last year when the economic impacts of the pandemic were unclear.

Those restrictions are still in place, but analysts expect them to be lifted at the end of October, when the Office of the Superintendent of Financial Institutions has said it will be adjusting the amount of capital that banks are required to hold.

Like so much else in financial outlooks though, delays in reopenings due to the Delta variant could push the timing on dividends further out.

With so much uncertainty in the transition, investors may be somewhat cautious in their response to earnings in the quarter, much like they were with U.S. earnings, Shanahan said.

91裸聊视频淭he overall reaction to large U.S. bank earnings was muted, and I would kind of expect that to be the case.91裸聊视频�

Scotiabank and Bank of Montreal report on Tuesday, followed by National Bank and Royal Bank on Wednesday and CIBC and TD Bank on Thursday.

Ian Bickis, The Canadian Press

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