The effects of heightened inflation and central bank efforts to rein it in by slowing the economy are showing in the second-quarter results from Canada's big banks.
Four out of the Big Five banks have reported earnings that missed expectations as they set aside more money for bad loans, struggle to contain rising costs, and several see their revenue take a hit from slower loan growth.
CIBC was the lone outlier as its results Thursday came in better than analysts had expected.
While Canadian mortgage loan growth has slowed to a trickle, with several banks reporting flat results from the previous quarter, much of the focus these days is on what's going on with the banks' U.S. operations following several high-profile bank failures.
Several bank executives have noted the more challenging economic conditions, while TD Bank Group warned of tougher days ahead as it said it no longer expects to meet its medium-term earnings growth target.
The collapse in the quarter of TD's proposed $13.4-billion takeover of First Horizon bank was a key factor in the shift, but the bank also cited the "deterioration in the macroeconomic environment" for the expected miss.
TD chief executive Bharat Masrani said in a statement that the bank was navigating through an "unpredictable operating environment" as it reported a second-quarter profit of $3.35 billion, down from $3.81 billion in the same quarter last year and set aside more money for bad loans.
TD said its provisions for credit losses amounted to $599 million, up from $27 million a year ago.
RBC chief executive Dave McKay said in a statement that the bank was operating in a "complex macro environment" as it reported a profit of $3.65 billion in the quarter, down from $4.25 billion in the same quarter last year.
The bank's drop in profits came as its provisions for credit losses amounted to $600 million compared with a recovery of $342 million a year earlier.
CIBC chief executive Victor Dodig said in a statement that they're in a "more fluid economic environment" as the bank reported a second quarter profit of $1.69 billion, up from $1.52 billion last year.
The bank, one of the early movers on increasing its provisions, said it set aside $438 million for credit losses, up from $303 million a year earlier.
On Wednesday, both BMO and Scotiabank also reported lower profits as higher expenses, provisions for credit losses and slowing loan growth weighed on their results.