The National Bank of Canada announced a notable decline in performance in its financial markets division in the last quarter as it also bolstered its provisions for bad loans in preparation for a potential economic slowdown in the future.

The CEO, Laurent Ferreira, said in a conference call with analysts on Wednesday: "We continue to operate in a challenging environment."

He also added that the bank achieved strong profits, but saw a "less positive backdrop" in the financial markets sector.

The division recorded profits of $205 million in the last quarter, down from $279 million in the third quarter of 2022, which the bank attributed to a decline in trading activity and exceptionally low market volatility.

Overall, the bank, headquartered in Montreal, reported a net income of $839 million or $2.36 diluted earnings per share for the quarter ended July 31, up from $826 million or $2.35 diluted earnings per share in the third quarter of 2022.

Total revenues for the quarter reached $2.52 billion, up from $2.41 billion in the same quarter last year.

On a normalized basis, the National Bank said it earned $2.21 diluted earnings per share, down from $2.35 diluted earnings per share in the same quarter last year.

Analysts had expected an average normalized profit of $2.38 per share, according to estimates compiled by market data firm Refinitiv.

For his part, John Aiken, an analyst at Barclays, noted in a memo that this shortfall was largely due to the "sharp decline" in financial markets revenue.

The bank also saw an 8.6 percent increase in expenses, or a 6.7 percent adjusted increase, driven by technology costs.

Mari Chantal Gingras, the bank's CFO, also stated in the call that the bank is focused on keeping costs under control, especially amid economic uncertainty.

The bank is also working to reduce its workforce, largely through attrition. The number of full-time employees decreased by 227 in the third quarter to 18,821 from a peak of 19,048 in the first quarter. However, the total headcount remains above the level of 18,502 in the third quarter of last year.

Gingras stated that while the bank continues to closely monitor employee numbers, it has no plans for large-scale job cuts.

The National Bank stated that its personal and business banking operations generated $328 million in the third quarter, up from $319 million the previous year, as revenue growth was partially offset by increased non-interest expenses and higher credit loss provisions.

The bank's wealth management division also recorded $183 million in the last quarter, up from $175 million in the same quarter last year. The bank's specialized financing and international business generated $128 million in the third quarter, up from $125 million the previous year.