The Globe and Mail reports in its Thursday, June 1, edition that National Bank of Canada posted a drop in second quarter profit on higher costs and rising reserves for potentially sour loans as the threat of a recession drags on results across the banking sector. The Globe's Stefanie Marotta writes that a worsening economic outlook has weighed on bank earnings as high interest rates squeeze margins and concerns over loan losses mount. National Bank chief executive officer Laurent Ferreira said during a conference call, "The economy is adjusting to a higher-rate environment and much uncertainty remains around the path of interest rates and inflation." The bank earned $847-million or $2.38 a share in the three months that ended April 30. That compared with $889-million or $2.53 in the same quarter last year. The bank said its adjusted earnings, which account for one-time items, also came in at $2.38 a share. That fell just below the $2.39 analysts expected, evading the steeper misses of many of the other large Canadian lenders. National Bank shares tumbled $2.80 to close at $97.32 on Wednesday, leading bank stocks lower as investors continue to sour on the near-term challenges putting pressure on the financial sector.