Good morning. In focus today, we’re looking at why analysts are more exercised than usual over Canada’s bank earnings, which all take place over two days next week.

Deals: Canadian miner Sherritt International Corp. is nearing a sale to a former Trump administration official at a discount to its already depressed share price after U.S. sanctions on Cuba forced the company to suspend its Caribbean operations.

Security: A former Huawei subsidiary is planning talks with the federal government to enter Canada.

Climate: Advocacy group Investors for Paris Compliance is shutting down.

Economy: Small grocers are worried about industry imbalance because of an increase in fuel surcharges.

CIBC Capital Markets analyst Paul Holden and his team perhaps said it best in a recent note to clients: “Six banks, two days – it’s going to be a banger.”

Canada’s major banks are reporting earnings against a mix of strong market activity, weak loan growth, rising credit caution and bank stocks that have already priced in a lot of good news.

This isn’t exactly the stuff of Glastonbury, but as far as two days on the TSX go, it makes for an undeniably interesting lineup.

From six banks reporting over two days, here are four themes we’re watching:

1. A high bar for success

Canada’s largest lenders have lofty expectations to clear.

The banking giants might report another round of earnings beats, but analysts are warning that results driven by capital markets may no longer be enough to push shares higher.

Big Six bank stocks have gained 7.6 per cent since first-quarter reporting, leaving valuations well above historical averages. (Valuations measure how much investors are willing to pay for a company relative to its earnings.)

Scotiabank analysts said bank valuations now look “frothy,” suggesting investors already expect another quarter of large earnings beats. But they said higher valuations are partly justified by larger capital cushions, better risk management and the banks’ ability to benefit from strong capital-markets activity.

Canadian bank stocks have also benefited from a “positive halo effect” tied to the country’s resource-rich economy and a “pro-business Carney government,” BofA Securities analyst Ebrahim Poonawala wrote in a note to clients yesterday. That has allowed investors to look past weakness in jobs and housing, as well as uncertainty around trade with the United States, he said.

2. Capital markets carry earnings again

Trading and investment banking are expected to do much of the heavy lifting, although results are forecast to come down from last quarter’s unusually strong levels.

Still, Scotiabank expects capital-markets earnings to rise 13 per cent from a year earlier.

During the quarter the banks are about to report, Canadian trading volumes were up 55 per cent from a year earlier, U.S. equity trading volumes were stronger, and equity and debt capital-markets activity also picked up. Those conditions are expected to support trading desks, investment-banking fees and wealth-management divisions.

Individual results may vary: National Bank and Royal Bank might be better positioned for capital-markets upside, analysts wrote, helped by their market exposure and deal activity. TD may benefit less because capital markets account for a smaller share of its earnings.

3. Credit losses on watch

But analysts are questioning whether the Big Six can keep riding heavy trading volumes and deal-making while household loan growth stays weak and credit costs edge higher.

Provisions for credit losses – the money banks set aside for loans that may not be repaid – are expected to rise. Delinquencies of more than 90 days edged higher last quarter across credit cards, unsecured lines of credit, mortgages and auto loans, The Globe’s Stefanie Marotta reported.

Banks said then that they expected early-stage delinquencies – missed payments before borrowers become seriously overdue – to improve if unemployment stabilized.

Instead, unemployment rose to 6.9 per cent in April. Analysts at CIBC had expected provisions tied to loans already showing signs of trouble to peak in the second quarter and then gradually improve. They now expect them to stay elevated for longer, citing a weaker Canadian economy, higher inflation, higher borrowing costs and limited progress on U.S. trade talks.

The banks’ average total PCL ratio is expected to lift a little higher this quarter – nothing eye-popping – but “the trajectory for PCLs will likely gain in importance this quarter,” the CIBC analysts wrote.