TD Bank Group (TD.TO) announced a decline in first-quarter profit on Thursday as the Canadian bank allocated more funds to cover deteriorating loans.
The escalation in interest rates has heightened the likelihood of borrowers defaulting on loan repayments in an uncertain economic climate, prompting banks to set aside larger provisions for potential losses.
Based in Toronto, TD Bank saw its provision for credit losses surge to C$1 billion (£584 million) in the first quarter compared to C$690 million (£403 million) a year ago.
Intense competition for deposits has further pushed up funding costs, with banks offering higher rates to retain customers and deter them from seeking out more profitable alternatives.
In the first quarter, TD Bank’s net interest income, representing the disparity between interest earned on loans and paid out on deposits, decreased by almost 3.2% to C$7.49 billion (£4.38 billion).
Within its operations, the Canadian personal and commercial banking unit of the bank reported a modest 3% rise in net income, whereas its U.S. retail segment experienced a significant 43% decline.
Adjusted net income for the bank dropped to C$3.64 billion (£2.13 billion), or C$2.00 (£1.17) per share, in the quarter, down from C$4.15 billion (£2.43 billion), or C$2.23 (£1.30) per share, in the same period a year earlier.