UPDATE 3-Scotiabank profit jumps, pushing stock to new high

Tue Mar 5, 2013 4:43pm EST

* Profit slightly exceeds estimates, dividend raised

* Stock rises 0.7 pct, hits all-time high

* Caps strong earnings season for Canada's top five banks (Adds analyst comment, closing share price)

By Cameron French

TORONTO, March 5 (Reuters) - Bank of Nova Scotia capped the Canadian bank earnings season with a better-than-expected 13 percent profit gain and a dividend hike, helped by higher markets-related income and the acquisition of Canadian online lender ING Direct.

The result, which pushed its shares to an all-time high, ended an earnings period that saw all of Canada's five biggest banks exceed earnings estimates and all but one raise dividends, as each were able to find ways to boost profit in spite a slowdown in their key consumer lending businesses.

In Scotiabank's case, its numbers were padded by the C$3.1 billion ($3.01 billion) acquisition of the Canadian online bank of Dutch lender ING Groep, which boosted loans and deposits, although its lower-rate mortgages weighed on the bank's loan margins.

"The ING numbers kind of cloud the trends a little bit, but if you take those numbers out, you get still-solid progression. The margins hung in well, the loan growth numbers are OK," said CIBC World Markets analyst Robert Sedran.

Net profit was C$1.63 billion, or C$1.25 a share, in the fiscal first quarter ended Jan. 31. That compared with a year-before profit of C$1.44 billion, or C$1.20 a share.

Excluding certain items, Scotiabank earned C$1.27 a share, up from C$1.22 a year before, and just beating the $1.25 a share expected by analysts, according to Thomson Reuters I/B/E/S.

The addition of ING direct, along with organic asset growth and lower credit losses, pushed income from the Canadian banking up 21 percent to C$574 million.

"(Loan-loss) provisions were lighter than forecast, consistent with the other banks this quarter," John Aiken, an analysts at Barclays Capital, said in a note.

Acquisitions also contributed to Scotiabank's international operations, as the $1 billion acquisition of a 51 percent stake in Colombia's Banco Colpatria, which closed early last year, helped push international banking income up 12 percent to C$416 million.

Scotiabank, Canada's third-largest bank, operates in more than 50 countries, with the heaviest weighting in Latin America and a growing presence in Asia.

Profit at its global banking and markets division, which includes trading, investment banking and advisory fees, rose 28 percent to C$399 million.

Wealth managed income rose 7 percent to C$301 million, helped by stronger markets..

SHARES HIT HIGH

The bank's shares ended the session up 0.7 percent at C$61.32 on the Toronto Stock Exchange, after touching an all-time high of C$61.84 earlier in the session.

Canadian bank stocks have churned steadily higher in recent weeks in spite of signs that Canadian lending is slowing due to a cooling housing market and generally more frugal borrowing from heavily indebted Canadians.

Recent data shows that Canadians' debt-to-income levels hit a record in the third quarter of last year.

While analysts describe the current domestic environment as hostile to the banks, the results this quarter have shown the lenders are able to squeeze profit from other parts of their vast businesses.

"This quarter, capital markets did OK in most cases, and loan losses were actually an unexpectedly positive catalyst and helped offset some of that impact," said Sedran.

"So it's not all about retail lending in Canada."

As expected, Scotiabank raised its quarterly dividend by 5 percent to 60 Canadian cents a share, following the lead of Bank of Montreal, Royal Bank of Canada and Toronto-Dominion Bank last week.

Return on equity was 16.6 percent, down from 19.8 percent a year earlier.

While some analysts have suggested Canadian banks may bleed investors to U.S. banks that appear to be poised to benefit from a sharp rebound in the U.S. housing market, David Baskin, president of Toronto-based Baskin Financial, said there was little reason to turn away from the Canadian lenders.

"You're getting (good) returns on equity. You're getting a dividend of almost 4 percent, when five-year Canada bonds are under 2 percent," he said.

"What's not to like?" ($1 = 1.0293 Canadian dollars) (Editing by Jeffrey Benkoe, Grant McCool and Matthew Lewis)