On January 6, 2026, RBC Capital Markets hosted its annual Canadian Bank CEO Conference, bringing together senior banking leaders to discuss strategic priorities and market outlook. Immediately following the event, Darko Mihelic, Managing Director, Canadian Financial Services sat down with Gerard Cassidy, Large Cap Bank Analyst and Head of U.S. Bank Equity Strategy, to deliver a comprehensive first-read assessment comparing Canadian banking strategies with evolving dynamics in the U.S. market. The discussion underscores a constructive but divergent outlook in certain areas for financial institutions on both sides of the border.
Here are the top takeaways from the conference:
1. Loan growth and deposit competition heat up
The Canadian banks under our coverage generally expected approximately 50 basis points of Federal Reserve rate cuts throughout 2026 with modest loan growth in the U.S. accelerating toward year-end. We believe our covered U.S. banks would see stronger tailwinds, with the most recent Federal Reserve H.8 data (at the time of recording) showing 6% year over year loan growth signaling a potential inflection point. Historically, loan growth tracks closely with nominal GDP growth in the U.S., and American banks have underperformed this relationship for three to four years. 2026 could represent a breakout year for the U.S. banks under our coverage, with a steeper yield curve, featuring Fed funds rates around 3% to 3.25% with a positive slope of 75 to 100 basis points that have not been observed in 20 years, creating favourable conditions for net interest income generation, in our view.
We believe loan to deposit ratios are currently very low in the U.S. as the banking system maintains record deposit levels. Accelerating loan growth could intensify deposit competition in a world of falling interest rates, in our view. The Canadian banks under our coverage are interested in growing deposits in the U.S., particularly commercial deposits. At our conference, RBC's Dave McKay and other executives emphasized that consumer deposits represent the foundation of banking franchise value. We believe our covered Canadian banks, operating as relatively new entrants in certain U.S. deposit markets, benefit from lower baselines, enabling elevated growth rates as they scale operations.
2. Capital markets positioned for continued strength in 2026
The conference revealed optimism surrounding capital markets prospects for 2026 as the Canadian banks under our coverage saw the momentum from 2025 carry into Q1 2026. In the U.S., debt capital markets achieved record issuance levels in 2025, while M&A advisory revenues reached the second-best year in 30 years, according to Dealogic data. We expect this momentum to continue as alternative asset managers monetize private equity investments accumulated over prior years. The current U.S. regulatory environment provides more support for consolidation and M&A activity, in our view. Under the prior administration, bank deals typically required 12 to 18 months to close; under the current administration timelines are generally under four months. We believe that broader government deregulation initiatives and increased support for mergers create a limited window of opportunity for clients to execute transactions before potential policy shifts, positioning 2026 as a year of continued strength for investment banking and capital markets activity.
3. ROE and ROTCE improvements via divergent mechanisms
Both the Canadian and U.S. banks under our coverage have announced higher ROE and ROTCE targets, respectively, through different mechanisms, in our view. In the U.S., we expect ROTCE improvement to be mostly driven by regulatory capital relief through the anticipated Basel III Endgame proposal, expected in Q1 2026. Our covered U.S. banks currently maintain excess capital, with some banks carrying CET1 ratios at 11%, above their regulatory minimum of 8.5%, but are beginning to reduce capital levels toward 10%. We believe this denominator effect on ROTCE could deliver as much as approximately 100 basis points of improvement for every 100 basis points of CET1 ratio reduction. We believe the Canadian banks in our coverage universe expect a smaller contribution to their ROEs from reductions in capital ratios, and instead aim to drive ROE growth through increased profitability. This divergence reflects different regulatory landscapes: the U.S. banks under our coverage could benefit from deregulatory momentum while the Canadian banks under our coverage currently operate within more stable capital frameworks.
4. Strategic divergence on near-term capital deployment priorities
Despite many acquisitions in the U.S. over the last decade, the Canadian bank CEOs at our conference generally indicated lower interest in continued inorganic expansion in the near term, prioritizing organic growth instead. In contrast, the U.S. banks under our coverage have been accelerating consolidation, supported by streamlined regulatory timelines and cost synergies. U.S. acquirers can achieve 40% to 50% cost savings of the acquisition target’s overhead when acquiring in existing markets, a potential pricing advantage over the Canadian banks acquiring in the U.S., in our view. Additionally, U.S. banks deploy stock in acquisitions while Canadian deals traditionally use cash, further favouring U.S. consolidation.
5. Economic resilience supporting a benign credit environment
We believe credit quality remains fundamentally sound across both markets. The Canadian banks under our coverage emphasized economic resilience, and mostly expected stability in provisions for credit losses, with the caveat of CUSMA/USMCA negotiation outcomes. In the U.S., there appears to be improvements in consumer credit; credit issues appeared to be concentrated in non-bank lenders rather than bank portfolios, in our view.
