BAD QUARTER WON’T DENT BLOCKBUSTER YEAR FOR BIG SIX.

Don’t expect a blockbuster earnings report for Canada’s banks as they begin to report later this month, but analysts say it is likely the Big Six will once again defy any fears of a weak Canadian economy taking a serious bite out of their profits.

Earnings season will officially kick off Nov. 29 when Bank of Nova Scotia provides its results for the fiscal 2016 fourth quarter. Investors have been closely watching Canadian bank earnings during the past few years as they continue to operate amid a struggling Canadian economy. Pressures on the banks include a heavily indebted Canadian populace, a crash in oil prices that has led to increased loan loss provisions and fears that some Canadian cities are experiencing a housing bubble.

Analysts say that while the last quarter of the year can occasionally be weak for Canada’s banks — expenses tend to be seasonally higher — they expect they’ll once again defy predictions of doom.

“We have actually reduced (marginally) our loan loss assumptions for Q4/ F16, though the fact that this quarter often acts as a clean-up quarter means one should not expect the overall strength we saw in Q3/ F16, especially considering that expenses tend to be seasonally higher,” said Robert Sedran, analyst at CIBC World Markets.

While some banks saw an uptick in loan-loss provisions earlier this year — money set aside to cover any loan defaults — there has not been a massive spike in energy companies missing payments in Canada because of low oil prices.

And despite all the negative attention that continues to swirl around Canadian banks, their stocks have been on fire this year. The group is up more than 18 per cent, easily beating the S&P/ TSX Composite’s also impressive return of 15 per cent year-to-date.

Earnings have certainly not been propelling the rally. While most of the banks had stronger-than-expected profits, earnings growth was anemic compared to previous years.

Sedran said that the rally has been driven primarily by the banks defying some of the gloomier forecasts about their balance sheets. Massive energy company defaults have failed to materialize and the housing markets in Vancouver and Toronto have yet to see any meaningful corrections.

Still, some analysts warn that the oil story has yet to play out. John Aiken, an analyst at Barclays Capital who has been relatively bearish on the Big Six, said that banks will have to contend with low oil prices hurting the Canadian economy — and their profits — throughout much of next year.

“While WTI has strengthened broadly since hitting year-to-date lows in mid-February, oil prices remain more than 55-per-cent below levels from mid-2014,” he said. “As a result, we believe the impact on the economy and employment will remain a focal point heading into 2017.”

Sedran is more optimistic about 2017. He predicts earnings growth of almost five per cent next year — better than what was recorded in 2016 (for which he forecasts growth of around three per cent, total).

In addition to stronger growth, Sedran said that investors can also look forward to some dividend hikes this quarter. He predicts Bank of Montreal, Laurentian Bank and National Bank of Canada will all hike when they report in the next couple of weeks.