Canadian bank earnings forecast trimmed 7% after US tariffs

National Bank revises 2026 projections amid pressure on loan growth

Canadian bank earnings forecast trimmed 7% after US tariffs

National Bank of Canada has revised its outlook for Canadian banks, cutting its 2026 earnings forecast by 7% as newly imposed US tariffs begin to ripple through the financial sector.

The downgrade reflects expectations of weaker credit performance, slower loan growth, and reduced profits in wealth management, according to a report released Tuesday.

The updated forecast points to a more cautious environment for Canadian lenders, whose stability is now being tested by external trade shocks and a cooling credit market. Although Canadian bank stocks fell just 1.19% on the news, National Bank’s revised estimates highlight the potential for broader headwinds in the months ahead.

Despite the cut, National Bank suggests that the situation could mirror previous market downturns, including the early 1990s recession and the post-COVID recovery, where initial volatility was followed by long-term rebounds.

The report offers a tempered outlook for investors, noting that while near-term valuations may remain under pressure, the current cycle could present strategic entry points for those with longer investment horizons.

The 7% reduction in 2026 earnings estimates reflects not only softer credit conditions but also investor hesitation, which has deepened in response to the tariff-driven uncertainty.

The impact of the tariffs isn’t limited to Canadian banks. In the US, several leveraged-finance deals have been postponed as investors retreat from higher-risk assets.

Read next: Canada's mortgage market in the new trade war era

Over the past several days, at least two major loan sales were delayed, according to sources with knowledge of the transactions. These included financing for HIG Capital LLC’s acquisition of Converge Technology Solutions Corp. and a dividend deal tied to ITG Communications LLC, owned by Oaktree Capital Management.

The pullback adds to an already fragile backdrop. Prior to these delays, six US-leveraged loan transactions had already been pulled from syndication this year. Lenders involved in the Converge and ITG deals, Bank of Montreal and Banco Santander SA, declined to comment, along with representatives from HIG, Converge, and Oaktree.

According to a Morningstar LSTA index, US leveraged-loan prices dropped sharply at the end of last week, marking their biggest two-day decline in five years. The average loan price is now 95 cents on the dollar, the lowest since November 2023.

Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.