(Bloomberg) -- Bank of Nova Scotia earnings beat analysts’ estimates on higher revenue in the lender’s international and domestic divisions, even as it set aside more money for potential loan losses.

The Toronto-based bank earned C$1.69 per share on an adjusted basis in its fiscal first quarter, it said in a statement Tuesday, more than the C$1.61 consensus estimate published by analysts who cover the lender. 

It was a “relatively clean quarter,” according to Keefe, Bruyette & Woods analysts Mike Rizvanovic and Abhilash Shashidharan, who said that stronger revenue helped counter higher expenses. “A good result overall that should support the bank’s share price.”

Scotiabank shares rose 3% to C$65.81 at 2:05 p.m. in Toronto, their biggest intraday increase since Nov. 29.

The lender’s provisions for credit losses in the quarter rose to C$962 million ($713 million), more than the C$922 million average estimate of analysts in a Bloomberg survey.

“Although the Canadian economy has shown more resilience in response to the significant monetary policy tightening over the past two years, interest rates are having the desired impact on consumer sentiment and spending, which should allow for rate cuts later this year,” Chief Executive Officer Scott Thomson said on a conference call with analysts. “This quarter’s results reflect an increase in credit provisioning, given the incremental financial strain that sustained higher interest rates are having on our clients.”

The bank said it’s seeing growing stress in consumer lending as the Canadian economy weakens as well as higher delinquencies among retail borrowers in its Latin American businesses.

Loan-loss provisions on performing loans for the quarter were “driven by retail-portfolio growth and the impact of the continued unfavorable macroeconomic outlook, mainly on the commercial, corporate and Canadian retail portfolios,” Scotiabank said in the statement, while provisions for impaired loans were driven by Canadian auto loans and unsecured lines and delinquencies in international banking retail portfolios, mostly in Colombia, Peru and Chile.

RBC Capital Markets analysts Darko Mihelic has called Scotiabank a “canary in the coal mine” to watch for stress on consumer credit.

Scotiabank, which unveiled a new strategy under Thomson in December, was the only large Canadian lender to shrink its domestic mortgage book last year, and it actively sought out more core deposits to lower its cost of funding. It was all an effort to strengthen net interest margins, the difference between what it earns on loans and the amount it pays in interest for deposits.

Scotiabank also said it plans to focus new spending on North America and is evaluating whether to sell some of its businesses in Latin America that have delivered poor returns. Those plans are still in the early stages of execution, Thomson said Tuesday, adding that he was “encouraged by the early progress.” 

The bank has seen significant turnover in its leadership ranks, with the head of its capital-markets business, Jake Lawrence, set to exit next month for an executive role with Power Corp. of Canada. Thomson last year appointed new executives to run the bank’s international, wealth-management and Canadian retail-banking divisions.

Scotiabank is the first large Canadian bank expected to be affected by the phase-in of new regulatory rules on capital floors. This will require banks that use internal methods of calculating their risk-weighted assets —a crucial metric for capital ratios — to shift to using a standardized approach for more assets over time.

As a result of these changes, banks’ Common Equity Tier 1 capital ratios are likely to be dragged lower. Scotiabank said that ratio now stands at 12.9%, compared with 13% at the end of the fourth quarter. Canada’s bank regulator requires large lenders to maintain CET1 ratios of at least 11.5%.

Scotiabank still has a discount on its dividend-reinvestment program, a tactic that banks use to raise capital. Executives said Tuesday that it will wait until June, when the regulator issues its next policy decision on capital ratios, to decide whether to end the DRIP discount.  

(Updates with analyst and executive commentary, share price starting in first paragraph.)

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