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Investing.com -- Canadian banks are among global leaders in artificial intelligence adoption and are beginning to see returns on their investments flow to the bottom line, according to Jefferies analysts.
The firm said Tuesday that Canadian banks could achieve an incremental 50 to 75 basis point improvement in efficiency over the next several years, with upside of more than 130 basis points not fully priced into consensus estimates.
The analysis follows Q1-26 results that demonstrated strong productivity improvements across the sector. Jefferies estimates that incremental efficiency improvements of 50 basis points would result in an average lift to earnings of 130 basis points.
Toronto-Dominion Bank (TSX:TD) is targeting $500 million in improvements for both revenue and expenses from AI and automation, figures that exceed the assumptions required for Jefferies’ target improvement.
Canadian banks have been working with AI technology for several years, with five banks ranking within the top 30 global banks in Evident AI’s 2025 ranking. The group is now pivoting to enterprise-wide adoption.
Royal Bank of Canada (TSX:RY) is looking to generate between $700 million and $1 billion in enterprise value from AI benefits by 2027. TD is targeting $1 billion in value directly from AI, split evenly between annualized cost savings and revenue uplift.
Jefferies identified RY as a potential winner from AI implementation based on its spending and experience as an early adopter, despite its already strong efficiency ratio. The firm noted TD’s explicit AI-related goals and said U.S. AML remediation is fueling incremental investment and innovation that can spread across geographies and segments.
Canadian Imperial Bank of Commerce (TSX:CM) has been an aggressive spender on technology over the past five years, and the strong improvement in its productivity in Q1-26 indicates it has leapfrogged peers in terms of return on investment, according to Jefferies.
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