U.S. banks continue to outperform earnings expectations, driven by stronger interest income, resilient credit quality and healthy noninterest revenue. While profits are rising, share prices for major lenders remain rangebound, even as the broader market approaches valuation highs not seen since 2000.
BNN Bloomberg spoke with Ross Healy, chairman of Strategic Analysis Corporation, about the sector’s strong momentum, the risks posed by private lending and what investors should watch for as markets enter the fourth quarter.
Key Takeaways
- U.S. banks are exceeding expectations as loan yields rise faster than deposit costs.
- Noninterest income from trading, advisory and investment banking remains strong.
- Credit quality is holding up, with low provisions helping overall profitability.
- Bank stocks have yet to break out despite stronger earnings and higher market valuations.
- Canadian banks show selective strength, with Laurentian Bank cited as a potential takeover target.
Read the full transcript below:
ANDREW: Many of the big U.S. banks have beaten expectations on earnings, and some broader trends are emerging as a result. We’re joined by Ross Healy, chairman of Strategic Analysis Corporation. Ross, thank you very much. It’s great to see you. What are one or two patterns you’re seeing in these reports for the U.S. financial sector?
ROSS: A lot of things are going positively for U.S. banks right now. Among other things, with the stock market continuing to rise at a healthy pace, their fees from management, trading and investment banking are all strong. With these high valuations, it makes sense for companies to expand and acquire other firms, which contributes to profitability for the Wall Street banks.
Because the economy continues to hold up, loan losses have been quite benign so far. There hasn’t been much downward pressure on profits from that area, and net interest margins have been expanding as long rates hold up and short rates drift lower. It’s really a perfect confluence of positive developments for U.S. banks. They’re not just beating consensus estimates — they’re exceeding them by large margins, sometimes 16 or even 30 per cent.
One interesting point, though: when I look at the major bank stocks themselves, aside from perhaps JPMorgan, I don’t see them breaking out to all-time highs. They’re at the top end of their ranges, but not breaking out. So when I’m asked if I have a favourite U.S. bank stock, the answer is no — not yet.
ANDREW: What about the worries over private lending in the United States? We’ve seen some companies fuelled by private debt run into trouble, and the banks may not be immune if they’re exposed.
ROSS: What’s past may be prologue. We don’t yet know how this private lending issue will unfold, but it’s absolutely enormous, and controls over loan quality are a big concern. As you noted, we’ve already seen a couple of examples of companies going under, with ripple effects through the private credit space. How that affects U.S. banks remains unclear, because we don’t yet know which banks are heavily exposed. Those private lenders get their money from somewhere, after all.
ANDREW: Where should investors put their money right now? You’ve said market conditions look favourable for U.S. banks.
ROSS: Yes, they do. The U.S. market, led by the S&P 500, appears to be trying to break above the valuation peak it reached in 2000. It climbed to roughly five times book value earlier this year, pulled back a bit, but has now recovered. It looks as if the S&P 500 wants to break higher — and if that happens, there’s still good upside for the market.
ANDREW: What about the Canadian banks? Are you interested there?
ROSS: Yes, we are. A few of them are trading near very high levels. Royal Bank is heading toward a long-term valuation high, and TD Bank — which has been in the doghouse — looks like it’s breaking out technically and could return to its usual peak. I also like Laurentian Bank, which has a solid yield and looks very cheap.
ANDREW: Maybe we can put up a five-year chart. That’s been a long repair story — nobody even wanted to buy it out.
ROSS: True, but the stock is trading at a big discount to its book value and has a well-covered dividend. I keep wondering why one of the larger Canadian banks hasn’t made a move. Once acquired, better systems from a larger bank could significantly raise profitability. Laurentian is very cheap but potentially very profitable.
ANDREW: Presumably the big banks have looked, though. It’s funny it hasn’t attracted a bid.
ROSS: I keep wondering the same. Former president Donald Trump often complained that we don’t allow U.S. banks to enter Canada more fully. Well, here’s a perfect entry point. If a U.S. bank wanted to make a major move into Canada, Laurentian would be a good target.
ANDREW: For years, they were unionized, and that was often cited as a reason larger banks wouldn’t be interested.
ROSS: Exactly. And it’s for that reason, I think, that workers chose to decertify. It makes the bank more attractive to a potential acquirer. A larger organization could implement better systems, improve profitability and benefit both employees and shareholders.
ANDREW: Ross, I always appreciate your perspective. You were one of the prominent skeptics on Nortel years ago. Let me ask: Canadian politicians are expressing frustration at Stellantis moving production south. Is that inevitable?
ROSS: I’m concerned about it. The Trump administration’s policies are doing potential damage, and the auto sector is one of the areas affected. What the Canadian government will do about it remains to be seen.
ANDREW: Should Canada open up to Chinese-made cars? Some argue we’re missing out on cheaper electric vehicles because we’re protecting domestic automakers.
ROSS: If automakers move production south, then perhaps we should consider it. Chinese EVs are much cheaper and quite good quality. If that’s the new reality, why not?
ANDREW: Of course, that would mean a lot of lost jobs here.
ROSS: Realistically, that’s not the outcome we want. We need to protect our labour force and our auto industry as much as possible.
ANDREW: We’ll leave it there. Ross, great to hear from you.
---
This BNN Bloomberg summary and transcript of the Oct. 16, 2025 interview with Ross Healy are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
