UPDATE 2-Scotiabank profit rises 14 pct, eyes acquisition pipeline

Tue May 27, 2014 11:07am EDT

(Adds CEO, analyst comments on acquisitions, capital levels)

By Cameron French

TORONTO May 27 (Reuters) - Bank of Nova Scotia said on Tuesday its second-quarter profit rose 14 percent, beating estimates, and the lender's CEO suggested its strong capital levels will be directed toward acquisitions rather than large share buybacks.

The bank's stock surged to an all-time high on the results.

Brian Porter, who has emphasized organic growth since taking over as chief executive officer last year, said the bank was eyeing expansion in credit cards, as well as wealth management and retail banking growth in Peru, Colombia, Mexico and Chile.

"We do have a pipeline of acquisitions that we're looking at ... if they fit our criteria, we want to have the ability to capitalize on those," Porter said on a conference call.

The bank, Canada's third-largest, posted a Tier 1 common equity ratio of 9.8, higher than rivals Toronto-Dominion Bank and Royal Bank of Canada posted last week, and well above the regulatory target minimum of 8 percent that comes into effect in 2016.

That figure could rise when Scotiabank disposes of all or part of its 37 percent stake in asset manager CI Financial , in line with plans announced two weeks ago.

Scotiabank, like its rivals, is looking for ways to offset the impact of slower growth in its core Canadian lending business amid a cooling housing market.

"I think you have to go out and find growth elsewhere, and you have a big slug of capital coming your way, it would make sense to go and deploy that," said Tom Lewandowski, a St. Louis-based analyst with Edward Jones.

While the bank also said on Tuesday it planned to buy back up to 1 percent of its shares, Porter said that was to offset option dilution and that he did not envision a larger buyback.

Net profit in the quarter was C$1.80 billion ($1.66 billion), or C$1.39 a share, compared with C$1.58 billion, or C$1.22 a share, a year earlier. Excluding an amortization charge, the bank earned C$1.40 a share, ahead of analysts' expectations of a profit of C$1.31 a share.

The bank's shares raced to an all-time high of C$69.07 in early trading, and were up 1.1 percent at C$68.74 on the Toronto Stock Exchange about 90 minutes into the session.

Canadian personal and commercial banking income rose 12 percent to C$565 million, helped by growth in auto lending volumes.

Global wealth and insurance profit climbed 11 percent to C$345 million, while the global banking and markets division earned C$385 million, up 9 percent.

Income at Scotiabank's international banking division, which spans Latin America and includes a sizable presence in Asia, rose by C$1 million to C$416 million.

($1 = 1.0854 Canadian Dollars) (Reporting by Cameron French; Editing by Sofina Mirza-Reid, Bernadette Baum and Tom Brown)

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