May 22 (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 ( SCHW ).

"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)