A robust Canadian economy is expected to carry the country's big banks to solid second-half results, but the first tentative steps out of an era of ultralow interest rates and a surging loonie could prove a mixed blessing for profits.

The Big Six banks will report fiscal third-quarter earnings this week and next, and though two familiar themes still dominate the conversation – rising rates and an uneasy housing market – neither is expected to noticeably move the needle on earnings for now.

On the positive side, the first step up in the Bank of Canada's key interest rate on July 12, and the expectation of more to come, could start to ease pressure on banks' profit margins.

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But the general optimism surrounding the sector is still tempered by continuing concerns about the Canadian housing sector, particularly in Toronto and the surrounding region. Early signs of a slowdown could slow growth in banks' mortgage portfolios.

A generally robust Canadian economy with low unemployment should help keep revenue rising and loan losses steady at large banks, even as analysts expect softer returns from capital markets and dampened profits from international operations owing to a stronger loonie. Add it up and banks appear to be on track to report the modest but steady growth they've forecasted to shareholders since the year began.

"We think there are pluses and minuses that add up to a decent [third-quarter] reporting season for the banks," Robert Sedran, an analyst at CIBC World Markets Inc., said in a research note.

"We see earnings growth settling in closer to mid-single digit run-rates from here."

Royal Bank of Canada reports first on Aug. 23, followed by CIBC a day later. Bank of Nova Scotia and Bank of Montreal both report on Aug. 29, National Bank of Canada on Aug. 30 and TD wraps up the season on Aug. 31.

The impact of rising interest rates is unlikely to be meaningful in the short term. Banks moved swiftly to raise their prime rates in step with the Bank of Canada's 25-basis-point bump to its benchmark rate, but those increases came too late in the quarter to make a real difference. (A basis point is 1/100th of a percentage point.)

And even though concerns remain that higher rates will add stress to hot housing markets, analysts expect only modest moves in loan losses among the big banks, with provisions for bad loans holding fairly steady over all.

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"Credit quality likely will remain okay," RBC Dominion Securities Inc. analyst Darko Mihelic said.

A trend toward rising rates gives banks reason to be optimistic and should begin to show results as the fiscal year winds down.

On average, about 39 per cent of loans at Canada's big banks have a floating rate, according to research by Mr. Mihelic. And a further 14 per cent of loans will mature or be repriced within three months.

Finally, the yield curve has steepened, and Mr. Mihelic says that should help net interest margins – the spread between what a bank earns on loans and pays on deposits.

"With the market seemingly pricing in another rate hike by the [Bank of Canada] before year end, this could be the start of the long awaited margin relief that banks (and investors) have been waiting for," John Aiken, an analyst at Barclays Capital Canada Inc., said in a note to clients.

At the same time, rising rates coupled with better economic growth and recovering oil prices conspired to send the Canadian dollar surging nearly 10-per-cent higher relative to the U.S. greenback during the fiscal third quarter, according to Mr. Sedran. And that could be a drag on banks' profits outside Canada, which will be worth less in Canadian dollars.

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"The Canadian dollar has rallied and turned currency translation into a modest earnings headwind," Mr. Sedran said. Among Canada's six largest banks, BMO and TD have the greatest exposure to U.S. earnings, while Scotiabank has the least.

Some investors can likely look forward to richer dividends. RBC and Scotiabank are widely expected to hike their respective payouts, in keeping with a pattern of announcing increases every other quarter. But analysts are divided about whether CIBC will follow suit: Its capital levels are healthy, but the bank also closed a $4.9-billion (U.S.) deal to buy Chicago-based PrivateBancorp during the quarter.

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EPS estimates

Consensus estimates for earnings per share for the Big Six banks ahead of reporting season, according to analysts surveyed by Bloomberg. They have been adjusted for certain items.

Royal Bank of Canada

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Report date: Aug. 23

Estimated adjusted EPS for Q3 2017: $1.87

Actual adjusted EPS for Q3 2016: $1.73

CIBC

Report date: Aug. 24

Estimated: $2.65

Actual: $2.58

Bank of Nova Scotia

Report date: Aug. 29, 2017

Estimated: $1.64

Actual: $1.54

Bank of Montreal

Report date: Aug. 29

Estimated: $2.00

Actual: $1.89

National Bank

Report date: Aug. 30

Estimated: $1.32

Actual: $1.33

Toronto-Dominion Bank