(Reuters) -Canada's second largest lender TD Bank on Thursday reported better-than-expected quarterly earnings driven by growth at its capital market business, as a volatile environment boosted trading activity.

The unit reported a 16% jump in net income and record revenue of C$2.13 billion, a 10% jump from a year earlier, reflecting higher trading-related revenue and underwriting fees, including from the sale of its remaining equity investment in U.S. financial services firm Charles Schwab.

"When there is uncertainty in the market, people take views on the direction so you actually see more trading volume happening. TD, both on the securities side and wealth management side, will benefit from that," CFO Kelvin Tran said in an interview.

However, the lender set aside C$1.34 billion ($965.5 million) in provisions to shield against future souring loans in an uncertain environment, far more than the C$1.07 billion a year earlier.

"The uncertainty in the market does cause clients to pause in the wait and see mode, and they're deferring some long-term decisions. We still see long growth despite the uncertainty in the environment, but given the outlook and given that there's uncertainty, we build reserves," Tran said.

TD is also undergoing a broad-based strategic review as the new leadership looks to simplify the business and turn around the bank after its anti-money laundering problems. Chun, a longtime TD Bank executive, took the helm in February.

Tran said the bank is in the advanced stages of its review, which looks at how TD can "accelerate momentum and seize new opportunities".

TD kicks off the earnings season for Canadian lenders, with rival big banks set to report their results next week. TD's results offer a glimpse into the impact of the tariff chaos on the Canadian economy.

Adjusted earnings of C$1.97 per share beat analysts' average estimates of C$1.76, according to LSEG data.

($1 = 1.3878 Canadian dollars)