Watch the Big Six banks' top lines

Canadian bank reporting season is still a few weeks away, but the forecasts are starting to roll in because the fiscal quarter has already ended.

Although it's best to wait until all of the predictions are in before summarizing the expectations, the picture painted by U.S. banks is worthy of examination now because these institutions already reported in April. Looking at their numbers, the big picture is clear: keep an eye on the Big Six's top lines.

Until now, analysts and investors focused the banks' bottom lines when the institutions reported because there was a big interest in how things like loan loss provisions affected earnings. Now that these surprises have stabilized, their attention is swinging back to revenue.

"With loan losses down materially from the peaks reached during the recession (and admittedly proving to be more a catalyst than the market or management had assumed they would be) the importance of revenue growth has grown," noted CIBC World Markets analyst Rob Sedran.

So how did the U.S. banks fare in this area? Not so hot. "A troubled top line was a defining feature of the recent U.S. bank results," Mr. Sedran noted.

John Aiken at Barclays Capital agrees. "While provisions eased for the quarter, many banks benefited from the release of loan loss reserves, offsetting muted top line growth." This slowdown was caused by things like soft loan growth.

Last quarter the Canadian banks posted average revenue that was 7.5 per cent higher over the previous three months, but Mr. Sedran noted that loan growth was "hardly" a main driver in earnings beatings the consensus.