(Reuters)

Canada’s Bank of Nova Scotia reported a fall in third-quarter profit on Tuesday, as the lender set aside more in rainy-day funds, compared with a year earlier, to cover for potential credit losses amid an uncertain economy.

Elevated borrowing costs and the possibility of a recession have raised the threat of customers defaulting on their loans, and lenders are preparing for credit card and other delinquencies in a challenging economy by building bigger buffers to guard against such potential loan losses.

Scotiabank’s provision for credit losses was C$1.05 billion, up from C$819 million a year earlier.

Net income for the three months ended July 31 was C$1.91 billion ($1.42 billion), or C$1.41 per share. The bank had reported a profit of C$2.19 billion or C$1.70 per share, a year earlier.

(US$1 = 1.3467 Canadian dollars)