Canadian banks are expected to report earnings this week for the fourth consecutive quarter, the longest quarterly decline since the financial crisis, due to margin crunch and a decline in commercial loans. But investors say the flattening of provisions for loan losses heralds a turning point.

Canadian and US 10-year bond yields have risen in the coming quarters and are also expected to boost bank profit margins as short-term interest rates remain close to zero. Banks usually finance loans with short-term loans or bank deposits.

Analysts estimate that Canada's six largest banks-Royal Bank of Canada, The Toronto-Dominion Bank, Bank of Nova Scotia of Canada, Bank of Montreal, Imperial Commercial Bank of Canada and National Bank of Canada-will fall by an average of 4.3 per cent in the first quarter and 12 per cent in the first three months compared with the same period a year earlier, according to Refinitiv.

Bank of Montreal (BMO) and Canada's Bank of Nova Scotia will begin reporting results for the three months to January on Tuesday.

Driven by vaccine deployment, bank CEO have become optimistic about 2021, although Canada's vaccine deployment rate is slower than some developed countries.

Steve Belisle, senior portfolio manager at Manulife Investment Management, said: "whatever the short-term problems, we have a variety of vaccines, which is gratifying." "compared with the worst-case scenario last year, they have every reason to be optimistic."

Profit decline in the first quarter will be driven by profit margin pressure and modest loan growth, Canaccord Genuity analyst Scott Chan said in a report on Thursday. But Chan said profits were expected to benefit from strong mortgage growth driven by strong demand in the housing market.

Chan said he raised his earnings forecast by 3 per cent, "thanks to our assumptions about improved credit conditions and continued promotion of market-sensitive businesses."

Anthony Visano, managing director of Kingwest & Company, said the record loan loss provision for 2020 meant that capital provisions were unlikely to increase significantly this quarter. Kingwest & Company owns shares in TD Bank, Bank of Nova Scotia of Canada and Imperial Commercial Bank of Canada.

However, unlike Bank of America Corporation, who has begun to use some of the reserves for profit, Canadian banks may not do so until later this year, he said.