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UPDATE 2-Scotiabank profit rises on ING deal, but int'l unit weak

Cameron French
Friday, 6 Dec 2013 | 11:55 AM ET

* Fourth-quarter adjusted profit C$1.31 vs est C$1.32

* Profit at Canadian retail banking business jumps 23 pct

* Shares up 0.7 pct

TORONTO, Dec 6 (Reuters) - Bank of Nova Scotia reported a 12 percent rise in quarterly profit due to its acquisition last year of online bank ING Direct, but results were marred by a sluggish performance at its international unit.

Shares of Scotiabank, Canada's No. 3 lender, were up 0.7 percent at mid-morning, slightly underperforming most of its Canadian peers.

"I though it was a pretty good quarter for domestic banking, but (there was) weakness in international, which really drives the story at Scotia," said Tom Lewandowski, a bank analyst at St. Louise-based Edward Jones.

Income from Scotiabank's international banking division, which includes a presence throughout Latin America and parts of Asia, rose 3 percent to C$467 million ($438.64 million), held back by narrowing interest margins and an 18 percent rise in loan-loss provisions.

The results cap a Canadian bank reporting period in which most banks benefited from steady growth in domestic retail banking and wealth management income but were hurt by weakness at their capital markets arms.

Scotiabank's overall net profit rose to C$1.70 billion, or C$1.30 per share, in the fourth quarter ended Oct. 31, from C$1.52 billion, or C$1.18 per share, a year earlier.

Excluding amortization of intangibles, the bank earned C$1.31 per share, slightly below the average analyst estimate of C$1.32, according to Thomson Reuters I/B/E/S.

Canadian retail bank earnings rose 23 percent to C$593 million, driven mainly by the bank's acquisition of the Canadian online banking division of Dutch lender ING Groep last year.

Retail banking has continued to be a source of stability for Canadian lenders despite concerns about a slowing housing market and low interest rates.

Even excluding the impact of the ING Direct acquisition, Scotiabank saw residential mortgages grow by 5 percent, while personal loans and credit cards grew by 10 percent.

Fueled by record low borrowing costs, Canada's housing market boomed following the financial crisis, lifting bank profits. But some fear this mean banks will be hit especially hard if the property sector crashes.

Canadian housing activity softened in 2012 after the federal government tightened mortgage rules, then bounced back this year. The Bank of Canada on Wednesday said it still expects a soft landing for housing and suggested it is in no hurry to raise interest rates.

Income at Scotiabank's global banking and markets division, its wholesale banking unit, fell 15 percent to C$344 million.

The results are the first since Brian Porter took over as Scotiabank chief executive in November, replacing Rick Waugh, who stepped down after 10 years in the top job.

Scotiabank shares, which have risen 10 percent this year, were up 49 Canadian cents at C$63.81 on the Toronto Stock Exchange.