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May 27 (Reuters) - Bank of Nova Scotia BNS.TO reported a rise in second-quarter profit on Wednesday, as higher interest income and stronger trading activity boosted the Canadian lender's earnings.

Canada's rate-cut cycle trimmed banks' deposit costs and supported loan demand that kept borrowing broadly steady during the quarter despite macroeconomic pressures.

Scotiabank's net interest income — the difference between what the bank earns on loans and pays out on deposits — rose 4.8% to C$5.52 billion ($3.99 billion) from a year ​earlier.

Shifting interest rate expectations and economic uncertainties tied to broader geopolitical unrest forced investors to rejig their portfolios to hedge risks, spurring activity in the bank's trading unit.

Market volatility pushes investors to reposition their portfolios, which in turn helps the banks earn more from fees.

Net income attributable to equity holders in the bank's global banking and markets came in the at C$457 million, compared with C$413 million a year ago.

Shares of the lender have gained nearly 10% so far in 2026, underperforming most of its Canadian peers.

The bank reported a net income of C$2.63 billion, or C$2 per share, in the three months ended April 30, compared with C$2.03 billion, or C$1.48 per share, in the year-ago period.

($1 = 1.3823 Canadian dollars)