National Bank of Canada reported a higher first-quarter profit on Wednesday as robust performance at its financial markets unit cushioned the hit from an increase in loan loss provisions.

First-quarter revenue at the lender's financial markets unit jumped 10% to C$755 million ($556.09 million).

However, an uncertain economic environment and high borrowing costs have raised the threat of more borrowers falling behind on their loan repayments, prompting lenders to set aside bigger rainy-day funds.

Montreal-based National Bank's provisions for credit losses in the first quarter rose to C$120 million from C$86 million.

The windfall from high interest rates has also tapered off as banks pay out more on deposits to retain customers from chasing higher-yielding alternatives.

National Bank's net interest income, or the difference between what banks earn on loans and pay out on deposits, fell 31.7% to C$751 million in the first quarter.

The bank's net income rose to C$922 million ($678.99 million), or C$2.59 per share, in the quarter, from C$876 million, or C$2.47 per share, a year earlier. ($1 = 1.3577 Canadian dollars) (Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Shounak Dasgupta)