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* Q1 net income C$1.44 bln, or C$1.20/shr
* Unexpectedly hikes dividend 6 pct
* Shares fall 1.4 pct in Toronto
By Cameron French
TORONTO, March 6 (Reuters) - Bank of Nova Scotia's first-quarter earnings rose due to higher profits from its international banking and wealth management operations, allowing the bank to unexpectedly raise its quarterly dividend by 6 percent.
The results, the fifth from a Canadian bank this quarter, met analysts' expectations, although they paled somewhat next to forecast-topping earnings from domestic rivals that have reported so far this quarter.
Scotiabank shares ended the session down 1.4 percent at C$52.94 on a day when most financial issues on the Toronto Stock Exchange lost ground.
Net income at Canada's third-largest bank was C$1.44 billion ($1.44 billion), or C$1.20 a share, up from C$1.25 billion, or C$1.08 a share, a year ago.
Stripping out a C$94 million gain from a real estate sale, core profit was C$1.15 a share on an accrual accounting basis, which was even with consensus estimates.
Barclays Capital analyst John Aiken said in a note the result benefited from stronger than expected trading revenue and lower loan-loss provisions, but that was offset by "weaker than anticipated fee-based revenues and a slightly elevated effective tax rate."
Profit from its international banking, which includes operations in dozens of countries in Latin America and Asia, rose 8.9 percent to C$391 million, helped by higher assets and deposits.
Wealth management income climbed 20.5 percent to C$288 million, boosted by last year's acquisition of DundeeWealth, .
Profit from domestic banking, Scotiabank's largest segment, rose 5.3 percent to C$475 million due to higher loan volumes, but that was pinched by narrow lending margins.
"Asset growth continues to be partially offset ... by ongoing competitive pricing pressures, although we are seeing signs of margin stabilization," Scotiabank Chief Executive Rick Waugh said on a conference call.
Analysts have predicted a slowdown in retail banking growth due to more conservative borrowing from already heavily indebted consumers, combined with narrow interest margins, but they say the slower growth could be more of a factor later in the year.
Scotiabank's global banking and markets division, formerly known as Scotia Capital, saw its profit fall by 7.2 percent to C$311 million.
The bank said it remained confident it would achieve minimum regulatory expectations for new Basel III capital levels by the first quarter of 2013.
Canadian banks are expected to boast a Basel III Tier 1 common equity ratio of 7 percent by the beginning of next year. Scotiabank is the only domestic lender that has not yet released its pro forma ratio.
However, the fact that the bank raised its dividend suggests it is not concerned about meeting the standard, said National Bank Financial analyst Peter Routledge.
"I think if you came up a little short of that 7 percent target, you wouldn't want to have raised the dividend in the four quarters immediately preceding the measurement date. So that's a pretty good sign on capital for them," he said.
Scotiabank increased its payout by 3 Canadian cents to 55 Canadian cents a share.
The dividend hike follows increases from Royal Bank of Canada and Toronto-Dominion Bank. Coming into the quarter, some had expected a dividend hike from TD, but few other banks.