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Photo by Peter Power/PostmediaCanada’s biggest banks are once again expected to post strong results when they report their third-quarter earnings next week, but to what extent their profits can boost their stocks is another thing.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorLike the previous quarter, a strong performance in the banks’ capital markets business segments will likely play a key role in boosting the profits of the Big Six, which begin reporting their results on Tuesday.Canada’s financial sector raised about $376 billion through 586 deals in the first six months of 2026, up 21.5 per cent from the $309.3 billion raised in the same period last year, according to Financial Post Data. The strong start puts the sector on track to surpass the $597 billion recorded in all of 2025, the highest annual total since 2010.Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againThe provisions for credit losses (PCL), the money banks keep aside to tackle loans that may potentially go bad, will also be closely watched, but analysts don’t expect them to be a major issue.“Credit remains stretched, but manageable,” Matthew Lee, an analyst at Canaccord Genuity Corp., said in a note on Tuesday. “The consumer continues to be somewhat challenged in Canada, with stubborn unemployment and limited economic growth likely to weigh on PCLs for the remainder of the year.”He doesn’t expect credit to be an “impediment to double-digit earnings-per-share growth” in the near term.But despite expectations for a positive third quarter, questions about whether bank stocks are overvalued continue to be a discussion point among analysts because a key metric that measures valuations suggests the lenders are trading at historical highs.For example, the large Canadian banks’ ratio of average price to expected earnings in mid-August was 16, which is well above the historical average of 11.3.“The elevated multiple remains top of mind for most bank investors with concerns around what is currently priced in and how much downside risk there might be if the quarter doesn’t pan out as well as expected,” Mike Rizvanovic, an analyst at Bank of Montreal, said in a note on Monday. “We believe there is a very high bar to getting share prices to rally through the third quarter.”Paul Holden, an analyst at Canadian Imperial Bank of Commerce, said it is hard to say if bank stocks can continue to push higher, but it is easier to say the third-quarter results should not be a reason for the stocks to trade lower.Like the previous quarter, it won’t be enough if banks beat analysts’ expectations mainly on the capital markets segment, he said.“Banks have a significant amount of excess capital, and we believe those that can deploy more capital and at higher returns could be the relative winners going forward,” he said in a note on Tuesday.That said, analysts have been cautious on bank valuations for a while even though their stocks have continued to rise. The shares of the Big Six have gained about 13.7 per cent on average as of Wednesday since the last time they released their earnings near the end of May.Analysts have provided different reasons for the surge, with one being that global investors are looking to diversify away from United States dollar assets and AI-heavy stocks amidst economic uncertainty. That search has led them towards metals, oil, gold and markets that offer a tangible link to resources, which Canada has plenty of.That inevitably benefits the banks, which are the largest companies in the S&P/TSX composite index.The third-quarter results will also reflect the full impact of the government’s decision to cap fees for non-sufficient funds, which is slapped on consumers when they don’t have enough money in their account to cover a payment. In March, Ottawa capped this fee to $10 from a high of $48.“The impact, based on the guidance we received from the banks, appears very manageable,” Rizvanovic said. “RBC and TD (will) likely (see) the largest impact given their larger retail deposit base in Canada.” Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.