TORONTO (Reuters) - Bank of Nova Scotia (BNS.TO) said on Tuesday that quarterly profit rose 9.6 percent due largely to an acquisition, but missed estimates due to weaker commodities-related revenue and higher loan-loss provisions.
At mid-morning, the bank's shares were down 0.8 percent at C$59.11 in Toronto, making it the weakest performer among Canada's six biggest lenders, which were otherwise higher.
The result, the third earnings report from a Canadian bank this quarter, was padded by last year's C$3.1 billion ($2.98 billion) acquisition of the Canadian online lender ING Direct.
That deal contributed to a 19 percent jump in profit at Scotiabank's Canadian banking unit, which earned C$547 million.
But gains were more muted in the bank's other businesses, particularly global banking and markets, which saw income slide 6.7 percent to C$361 million due to declines in the bank's commodities and precious metals business.
Provisions for bad loans also weighed on the overall result, rising 30 percent to C$343 million, with most of the gains coming from the bank's international banking division.
"That goes to their exposure geographically. It's hard to get a handle on credit exposure there. It's just higher risk," said Tom Lewandowski, an analyst at Edward Jones in St. Louis.
Toronto-based Scotiabank operates in more than 50 countries, with the heaviest weighting in Latin America and a growing presence in Asia.
The bank, Canada's third-largest lender, earned C$1.60 billion ($1.55 billion), or C$1.23 a share, in the second quarter. That was up from a year-before profit of C$1.46 billion, or C$1.15 a share.
Excluding an amortization charge, the bank earned C$1.24 a share, falling just short of analysts' expectations of C$1.26 a share, according to Thomson Reuters I/B/E/S.
"Overall, it is a miss and so we expect some weakness relative to peers today," CIBC World Markets analyst Robert Sedran said in a note.
International lending profit climbed 5.1 percent to C$471 million, while wealth management income gained 12.4 percent to C$335 million.
The Canadian banking was strong even excluding the impact of the ING Direct acquisition, boasting residential mortgage growth of 7 percent despite signs that Canada's housing market is beginning to cool.
Weak mortgage growth led to disappointing second-quarter results at rival Toronto-Dominion Bank (TD.TO) last Thursday. Smaller National Bank of Canada (NA.TO) reported a stronger-than-expected profit on Friday due to robust trading results.
($1 = $1.0387 Canadian)
Editing by Jeffrey Hodgson and Matthew Lewis