Canadian banks to dodge worst case tariff scenario in latest earnings

TORONTO, Aug 25 (Reuters): Canada's big banks are expected to have lowered loan-loss provisions in the third quarter from the prior quarter as US tariffs have likely hurt their loan portfolios less than feared.
Canada's big six banks are expected to set aside a total of C$5.22 billion in loan-loss provisions for the third quarter, compared to C$6.37 billion in the second quarter, according to data compiled by LSEG.
The banks ramped up provisions over the past few quarters, bracing for potential bad loans in the belief that a possible North American trade war would hurt the economy and cause defaults on commercial loans, credit cards and mortgages.
About 92 per cent of Canadian exports by value entered the US tariff-free in June because they were exempt from tariffs under the North American free trade agreement, data from the US Census Bureau showed. Prime Minister Mark Carney on Friday removed some retaliatory tariffs Canada had imposed on the United States.
"Three months later, we believe cooler heads may be prevailing with manageable reciprocal tariffs implemented between the CUSMA-bound countries," Canaccord Genuity analyst Matthew Lee said, referring to the Canada, US and Mexico trade zone.