TORONTO — Canada’s big banks are expected to deliver another strong performance when they report third-quarter earnings this week, but money managers and analysts are wary that any missteps could mean volatility for their high-flying shares.

Canada’s major lenders have navigated a shifting tariff landscape, weak economic growth and a sluggish recovery in the housing market so far this year, seemingly with ease. Their resilience has driven their shares higher, upping the ante to impress Bay Street with their results.

“The biggest risk at a juncture like this isn’t so much what the actual results are because they’re going to be good and they’re going to be record-breaking, but it could be, ‘Has the bar been set too high?'” said Brian Madden, chief investment officer with First Avenue Investment Counsel. His fund owns TD Bank, Royal Bank and BMO.

Big Canadian banks have seen their stock prices rise sharply this year, with gains ranging from around 20 to 35 per cent year to date.

But, failing to meet expectations doesn’t mean the stock needs to “crater,” Madden said.

“It just might mean that they need to chop around sideways for a while while they grow into the multiple as earnings catch up to the price,” he said.

Madden said he expects the midpoint of annual earnings growth for the Big Six to come in at around 13 per cent.

He said the banks have been dealing with the economic situation exceptionally well, with credit loss provisions — money set aside by banks to cover bad loans — having peaked in most cases. He added that provisions are now coming down as a percentage of average loans.

Growth in the Canadian economy this year has been mixed, with the year starting off with a mild contraction and rebounding in the spring. Inflation has also been creeping up to the high end of the Bank of Canada’s one to three per cent target range. Meanwhile, the labour market has been showing signs of recovery with unemployment falling to its lowest level in two years in July.

“With the Canadian economy still mired in its doldrums, we do not expect much relief on the credit front, but nor do we anticipate that it will be a huge headwind, either,” John Aiken, an analyst at Jefferies, said in a note to investors.

He said he remains concerned that current valuations do not fully reflect the uncertain outlook for bank earnings, but does not have any specific concerns heading into the earnings reports.

“While we do not believe that the third quarter will pull the rug out from under their valuations, we maintain our stance that earnings will need to grow into their current prices, which is far from a near-term guarantee,” Aiken said.