Earnings for the big Canadian banks are expected to slip four per cent from the first-quarter, according to estimates by CIBC Capital Markets. Overall the banks will likely show growth of 5.3 per cent compared to the same time last year.
The big question will be which banks come out on top in a quarter that's expected to be characterized by lower trading revenues and a weaker outlook for the rest of the year.
"I wouldn't say there's going to be one bank that clearly leaves the rest in the dust," said Gareth Watson, vice-president of investment management at GMP Richardson Ltd.
One factor will be which banks have stronger capital market activity and trading revenues, he added.
"You can't necessarily gauge what those results are going to be without knowing the exact portfolios (each bank has) and that's probably going to determine who outperforms who."
Bank of Montreal (TSX:BMO) will be the first of the big banks to release its second-quarter earnings as it is scheduled to report Wednesday. TD Bank (TSX:TD) and Royal Bank (TSX:RY) deliver their results on Thursday.
Scotiabank (TSX:BNS) follows on May 29 and CIBC (TSX:CM) on May 31.
Overall, the banks will be hard-pressed to deliver results that outshine the solid profit increase of six per cent reported in the first quarter of 2012 on improvements in retail banking and higher trading revenues.
In that period, most banks, aside from CIBC, reported lower provisions for credit losses — or money set aside to cover bad loans — in the first quarter, a sign that fewer customers are defaulting and that finances could be improving.
However, warnings from the banks also suggested that mortgage lending could drop off this year as consumers focus on reducing debt and mortgage lending softens.
Tom Lewandowski, a financial services analyst with Edward Jones in St. Louis, said Canadian banks with a stronger international focus are more likely to outperform expectations this earnings period.
"There's going to be opportunity for banks that have exposure outside the Canadian market, which I think is going to slow," he said.
"It may not be this quarter but it's going to be a quarter down the line. The consumer just does not have the capacity to take on debt like they did 18 months ago."
Lewandowski pointed out two banks he thinks will come out on top.
"Scotiabank with their international operations, and also TD has an opportunity to outperform on the loan growth side, given some market share gains in mortgages," he said.
Generally, the banks aren't expected to boost their dividend payments, though consensus expectations suggest that National Bank (TSX:NA) could emerge as the sole bank to make such a move when it reports on May 31.