The market will also be looking for clues on the banks' expected expense growth into next year as wage pressures intensify, and long-awaited improvements in net interest margins as interest rates rise.
The "big six" Canadian banks - Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia (Scotiabank), Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada - on average have a dividend yield of 3.3%, according to Reuters calculations.
That compares with the global sector median of 2.5%, according to Refinitiv data.
The dividend increases, which would be the first since the country's financial regulator imposed a moratorium in March 2020 that was lifted earlier this month, could range from 10% for Scotiabank at the lower end to 34% at National Bank, Gabriel Dechaine, an analyst at National Bank Financial, wrote in a Nov. 22 note describing the coming hikes as a "dividend growth tsunami."
The banks are also expected to announce repurchases of about 2% of their outstanding shares on average.
"It's going to be a significant (dividend) increase, and will help them reduce excess capital on their balance sheets," said Steve Belisle, portfolio manager at Manulife Investment Management. "That flows through to better ROE (return on equity)."
Even without the higher dividends or buybacks, Canadian bank shares have rallied to record highs, driven in part by better-than-expected earnings due to the release of reserves set aside to cover loan losses that haven't materialized.
LOAN GROWTH ACCELERATION
The Canadian banks will be reporting their fourth-quarter earnings, with Scotiabank kicking off the results on Tuesday.
Analysts expect adjusted earnings for the top six lenders to jump about 37% from the year-earlier period, helped by a pick-up in business and credit card lending, strong mortgage growth and continued reserve releases.
An acceleration in loan growth is expected, as savings built up during the COVID-19 pandemic have lifted consumers' and businesses' purchasing power even at higher prices, with the broader economic recovery adding fuel to the fire, said Philip Petursson, chief investment strategist at IG Wealth Management.
The one blot on the horizon may come in the form of non-interest expenses. They could be 1% higher than in the third quarter, with much of the anticipated rise driven by variable compensation, and up 4% in fiscal 2022 on rising labor costs and continued investments in technology, CIBC Capital Markets analysts wrote in a note.
Earnings from capital markets earnings could also decline, although higher-than-expected trading revenues could help offset lower investment banking fees, some analysts said.
Profits are expected to be 6.6% lower than in the third quarter, largely due to releases of reserves, which are difficult to estimate and have driven better-than-expected results in past periods, and could again lead to positive surprises, analysts said.
The banks' improving revenue growth, strong capital positions and expectations for returns on equity to remain in the mid-teens for longer than expected are positives, National Bank's Dechaine said.
Wealth and asset management units are also likely to have seen further growth, as consumers continued to deploy cash piles they've amassed during the pandemic, Petursson said.
"It's really hard to see where the warts would be on the banks' earnings," he added.
(Reporting by Nichola Saminather; Editing by Denny Thomas and Paul Simao)
By Nichola Saminather