The coming week promises to be a busy one for the financial sector, with four of Canada's Big Six banks releasing second quarter results on Thursday alone and all six by Friday.

The festivities begin on Tuesday with the Bank of Montreal (BMO). The Bank of Nova Scotia (BNS), CIBC (CM), National Bank of Canada [TSX:NA], and TD Bank (TD) all follow with their results on Thursday, and Royal Bank (RY) closes out Bank Week on Friday.

Both Royal Bank (RY) and Toronto-Dominion Bank (TD) were downgraded to a “sell” at Dundee Securities on expectations for weaker credit quality, bringing them in line with the firm’s bearish view on the sector as a whole and its recommendations for all of the Big 5 banks.

Despite significant deterioration in its U.S. loan portfolio’s credit quality, Royal’s earnings have held up reasonably well on the back of its domestic retail banking programs, analyst John Aiken told clients. However, since Canada is unlikely to escape the “economic carnage” occurring in the U.S., he said it is only a matter of time before domestic credit quality begins to weaken materially, as credit card exposures have already started to show.

Canadian banks picked up where they left off after the holiday break with Toronto-Dominion Bank (TD), National Bank and now Royal Bank (RY) raising capital by bringing preferred share issuances to market. Capital ratios are clearly in focus these days, as the group has encountered everything from capital market related writedowns, counterparty risk and disclosure of exposures, to the global economic downturn, deterioration in lending-related credit quality and concerns about the level of regulatory capital since credit and liquidity problems emerged in the summer of 2007.

Merrill Lynch financial services analyst Sumit Malhotra said:

Fourth quarter bank earnings weren't pretty, but long-term fundamentals remain far more stable than what is currently priced into the market, says TD Newcrest analyst Jason Bilodeau.

Mr. Bilodeau said in a note to clients:

RBC Capital has released a list of stocks on the S&P/TSX Composite Index it claims will have the most “predictable” positive performance.

“Predictability factors tend to perform well during low earnings growth environments or periods of high market volatility,” RBC analyst Chad McAlpine said in a note on Wednesday. The list was produced using RBC's proprietary computer models and boasts “defensive, high-quality names ... they offer strong growth profiles at attractive valuations,” he said.

Laurentian Bank of Canada (LB.TO)

F4Q07 (Qtr End 10/31/07) Earnings Call