Banks set to report as investors focus on interest rates, capital requirements

Canadian bank stocks have been riding a wave of investor optimism so far this year, but analysts say the first-quarter results that start arriving later this week will be a reminder of the mixed economic picture ahead.

On the positive side are the signs of easing inflation and job reports that keep surprising to the upside; on the other side is the growing amount of money banks are having to set aside for the expected slowdown ahead. 

Investor concerns about capital requirements are starting to edge into the question of how well banks are profiting off higher interest rates, said Scotiabank analyst Meny Grauman, which has been the main focus in recent quarters.

“There is no doubt that the market’s almost singular focus on margins has already begun to weaken as capital concerns have taken some of that spotlight away,” he said in a note.