Bank of Nova Scotia posted a drop in third-quarter adjusted profit on Tuesday as the Canadian bank set aside more funds to cover potential losses from loan defaults.

Excluding one-off items, Scotiabank's net income came in at C$2.23 billion ($1.64 billion), or C$1.73 per share for the three months ended July 31, compared with C$2.61 billion, or C$2.10 per share, in the year-ago quarter.

($1 = 1.3602 Canadian dollars) (Reporting by Sri Hari N S in Bengaluru; Editing by Shweta Agarwal and Pooja Desai)