Canadian institutional investors looking for domestic economic stability can rest assured that Canada’s big banks continue to post strong results. But, according to a new study from PwC, the Big Six need to continue to adapt to regulatory changes and shifts in consumer spending in order to remain profitable.

In 2012, Canada’s six largest banks earned a combined $28.6 billion in net income attributable to bank shareholders, translating into an average 17.1% return on equity (ROE), according to PwC’s annual Canadian Banks: Perspectives on the Canadian Banking Industry report.

But, says Diane Kazarian, Canadian financial services leader at PwC, these banks are entering into an era that will be marked by a “new normal” of constant change and limited economic growth.

“While they continue to demonstrate their strength, the banks face conflicting expectations from shareholders, consumers, regulators and central banks, all of which add additional layers of complexity to the business of banking,” she says.

Regulatory reform constitutes a significant part of this new normal, with changes already implemented and more to come, explains Kazarian. The changes have increased banks’ operating costs as they update IT systems and add compliance staff to keep up.

“The costs of implementing regulatory changes are unavoidable, so banks must seize opportunities to streamline operations and ensure continued productivity and optimization,” says John MacKinlay, PwC’s financial services consulting leader. “To create efficiencies, for example, we recommend to banks that they bring all regulatory projects together under a single control. This will help maintain consistency in operations and costs, and not least of all, the customer experience.”

Low interest rates and retail lending slowed by increasing household debt levels are just two other factors that will affect the banks’ ability to be profitable. Many banks are already facing this reality by shifting focus to commercial and small business lending, wealth management, new insurance products and trading and investment banking.

“Canadian banks need to make sure they have a seat at the table as the landscape continues to alter,” says Kazarian. “While changes are certainly in store, there are new opportunities as well, and the Big Six are in a strong position to pave the road ahead. Proactively seeking out new growth drivers will help Canada maintain the resilience and strength that has earned us worldwide admiration over the past five years.”