Scotiabank’s Canadian banking unit, its biggest income generator, recorded a 31% fall in net income largely due to a build in loan loss reserves as US tariffs weigh on Canadian retail and commercial portfolios.

“Amidst the continuously evolving economic outlook, we are focused on what we can control,” CEO Scott Thomson said.

While trade negotiations are ongoing, analysts have still projected a recession or stagflation in Canada, but are optimistic that newly elected Prime Minister Mark Carney could implement pro-business policies that will drive private sector investment.

“This quarter we increased our performing allowances to reflect the impact of an uncertain macroeconomic outlook,” Thomson said.

Since taking charge in 2023, Thomson has led the company in a new direction focusing on the US$1.5 trillion North American trade corridor by selling troubled assets in Colombia, Panama and Costa Rica and instead investing in regional US lender KeyCorp.

Its international business reported a 6% increase in adjusted earnings and its global banking and markets segment recorded a 10% rise.

The lender reported adjusted earnings of C$1.52 (US$1.10) per share, compared with analysts’ average estimate of C$1.56, according to LSEG data.

Loan loss provisions, the money lenders set aside to cover for souring loans, rose to C$1.40 billion, from C$1 billion a year ago. Analysts had projected C$1.22 billion.