(Reuters) -TD Bank Group reported a fall in first-quarter profit on Thursday as the Canadian lender set aside more funds to cover for souring loans.
Elevated interest rates have raised the chances of more borrowers defaulting on their loan repayments in an uncertain economic environment, prompting lenders to set aside bigger rainy-day funds.
Toronto-based TD Bank's provision for credit losses rose to C$1 billion ($736 million) in the first quarter from C$690 million a year earlier.
Strong competition for deposits has also increased funding costs as banks pay out more to prevent customers from chasing higher-yielding alternatives.
TD Bank's net interest income, the difference between what banks earn on loans and pay out on deposits, fell nearly 3.2% to C$7.49 billion in the first quarter.
The lender's Canadian personal and commercial banking unit reported a 3% increase in net income, while its U.S. retail segment posted a 43% fall.
The bank's adjusted net income fell to C$3.64 billion, or C$2.00 per share, in the quarter, from C$4.15 billion, or C$2.23 per share, a year earlier.
($1 = 1.3587 Canadian dollars)