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(Adds share movement, analysts' comments)
May 3 (Reuters) - Canadian Western Bank's shares fell as much as 12 percent after the lender said it set aside more money to cover bad loans to oil companies.
The Edmonton, Alberta-based bank said it expects annual provision for credit losses to be at between 0.35 percent and 0.45 percent of average loans. The company had earlier forecast it at the high end of a 0.18 percent-0.23 percent range.
A more than 60 percent drop in oil prices since their mid-2014 high has forced banks to cut credit lines for oil and gas companies.
"This announcement confirms that all of the banks are hardly out the other side, but considering this bank's geographic exposure, it is proportionately more exposed," CIBC World Markets Corp analysts wrote in a note.
Alberta, home to Canada's oil sands and the No. 1 exporter of crude to the United States, has been hammered by the plunge in crude prices.
The company's shares were down 7.7 percent at C$25.34 in mid-afternoon trading. They touched a low of C$24.44.
For the second quarter ended April 29, Canadian Western recorded about C$40 million ($31 million) in loan losses, including C$33 million in losses on the oil and gas production portfolio.
This would imply a loss rate of 10 percent based on the company's C$329 million in loans to oil and gas producers at the end of the first quarter.
Canadian Western had earlier forecast a loss rate of 4.25 percent on its loans to oil and gas producers.
RBC Capital Markets analysts wrote in a note that they anticipate the losses to move higher, beyond Tuesday's guidance.
The company's direct exposure to the energy industry is about 5 percent of total loans outstanding, Canadian Western said in March.
$1 = 1.2704 Canadian dollars Reporting by Arathy S Nair in Bengaluru; Editing by Maju Samuel