theglobeandmail.com
Canadian Bank Earnings Growth Projected at 6 Percent, AI's Productivity Impact Debated
RBC analyst Darko Mihelic projects 6 percent year-over-year and 6 percent quarter-over-quarter growth in core EPS for major Canadian banks in Q3 2025, while BMO's Doug Porter suggests AI's productivity impact is less significant than the internet's, and Wells Fargo's Austin Pickle downgrades commodities.
- What is the projected growth for Canadian banks' core EPS in Q3 2025, and what factors contribute to this forecast?
- RBC analyst Darko Mihelic forecasts a 6 percent year-over-year and 6 percent quarter-over-quarter growth in core EPS for major Canadian banks in Q3 2025, driven by strong capital markets and wealth businesses performance. He expects stable credit quality despite some economic softness and recommends BMO, CM, and TD for outperformance.
- How does the assessment of AI's impact on productivity differ between RBC and BMO economists, and what evidence supports their views?
- Mihelic's prediction of robust growth for Canadian banks contrasts with BMO chief economist Doug Porter's assessment of AI's impact on productivity. Porter argues that AI's current contribution is not comparable to the internet's revolution in the late 1990s, citing productivity growth data.
- Considering the differing perspectives on AI's impact and commodity markets, what are the potential implications for investment strategies in the coming quarters?
- Wells Fargo's Austin Pickle downgraded commodities from overweight to neutral, citing better opportunities in other asset classes. While he anticipates a modest economic rebound benefiting Energy and Industrial Metals in late 2026, OPEC+'s production cuts and the copper price collapse influence his outlook.
Cognitive Concepts
Framing Bias
The framing emphasizes the opinions of financial analysts, presenting their predictions as central to the narrative. The headline (if there was one, which is missing from this text) would likely have further shaped the reader's understanding by highlighting specific predictions or analysts' recommendations. The use of direct quotes gives weight to the analysts' views, potentially overshadowing alternative interpretations. This focus on financial forecasts might steer readers toward investment decisions without acknowledging broader economic or social contexts.
Language Bias
The language used is generally neutral, employing financial terminology in a way typical of financial reporting. However, phrases like "soft spots" in relation to economic indicators introduce a degree of subjectivity. The analyst's description of economic trends as "muted" or credit quality as "stable" could be viewed as overly optimistic. More precise and data-driven language could enhance neutrality. For example, instead of "muted loan growth," a more specific measure of loan growth could be provided.
Bias by Omission
The article focuses primarily on the opinions and predictions of financial analysts, potentially omitting other relevant perspectives, such as those of consumers or small business owners. The impact of AI on productivity is discussed, but a broader range of technological impacts on the economy is not explored. The analysis of commodity markets might omit geopolitical factors or other significant macroeconomic influences.
False Dichotomy
The piece presents a false dichotomy by implying that AI's impact on productivity is either comparable to the internet's or insignificant. It does not fully consider the possibility of a gradual, but still substantial, impact over time. Additionally, the presentation of investment strategies creates an implied eitheor choice: take profits in commodities and rotate into fixed income or continue holding commodities.
Sustainable Development Goals
The article discusses positive growth in the Canadian banking sector, with projected 6% year-over-year growth and a 6% quarter-over-quarter increase in core EPS. This indicates a healthy economic climate and contributes to decent work and economic growth. The analysis also touches upon the impact of AI on productivity, a factor influencing economic growth.