Canadian Western Bank reported a smaller-than-expected profit as the company set aside more money to cover potential losses from loans to oil and gas companies in the wake of a slump in oil prices.

The bank, which mainly lends to clients in the western provinces of Canada including oil-rich Alberta, said its total allowance for credit losses increased almost 10% to CA$103.8 million (about US$77 million) in the quarter ended Oct. 31.

"Challenges included the negative impact of low oil prices and regulatory factors on our small portfolio of loans to oil and gas producers," CEO Chris Fowler said.

"We took a proactive approach to resolve positions within this portfolio, which resulted in higher-than-expected provisions for credit losses."

A nearly 55% drop in oil prices since mid-2014 has forced banks to cut credit lines for oil and gas companies.

On an adjusted basis, the company earned 59 Canadian cents per share, missing the average analyst estimate by one cent, according to Thomson Reuters I/B/E/S.

The net income attributable to shareholders fell to CA$47.8 million, or 54 Canadian cents per share, from CA$53 million, or 66 Canadian cents per share, one year earlier.