(Reuters) – The Bank of Nova Scotia and National Bank of Canada on Tuesday released better-than-expected second quarter results despite significant profit declines due to spikes in loan loss provisions due to the COVID pandemic -19.

Canadian banks are bracing for an increase in loan losses this year and next due to the recession caused by the pandemic. While loan deferrals and government assistance have limited some damage in the short term, borrowers are expected to have difficulty maturing.

“The world is going through an extremely difficult period, both from a health and financial point of view,” said National Bank chief executive Louis Vachon in a statement, adding that the provisions reflect “the bank’s most conservative estimate before. uncertain macroeconomic outlook “.

National Bank posted a 32% drop in profits in the quarter ended April 30, as funds set aside to cover future loan losses increased sixfold to C $ 504 million (365 , $ 59 million) over the previous year. It reported earnings per share of C $ 1.01, beating analysts’ estimates by 91 cents.

Scotiabank, which previously posted a 41% year-over-year decline in profits as provisions more than doubled, also beat expectations, pushing shares up 7.4% to close at C $ 55.84 , the largest overnight increase in two months. Toronto’s benchmark equities closed 0.5% higher.

The National Bank made a report after the markets closed.

Scotiabank CEO Brian Porter said earlier that he expects loan loss provisions in the third quarter to be similar to the previous period, but said the outlook beyond of it remained dark.

“The banking industry will be picking up broken eggshells for a number of quarters,” he said on a conference call with an analyst.

National Bank’s P&C unit profit fell 71%, but profits were helped by gains from wealth management income over higher commission income.

Scotiabank Banking Services and Global Markets also saw profits rise 25% as market volatility boosted trade.

($ 1 = 1.3786 Canadian dollars)