* Fourth-quarter adjusted profit C$1.31 vs est C$1.32
* Profit at Canadian retail banking business jumps 23 pct
* Shares rise 1 pct
By Cameron French
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 the results were marred by a sluggish performance at its international and investment banking units.
The results from Scotiabank, Canada's No. 3 lender, cap off a fourth-quarter earnings period that saw the country's top lenders benefit from steady if unspectacular growth in domestic lending and strong wealth management returns.
Scotiabank has eschewed the U.S. expansion strategy of some peers, and has instead built a large international footprint in Latin America and Asia through modest-sized acquisitions over several years.
The domestic acquisition of Dutch lender ING Groep's Canadian online bank late last year generated the bulk of the year-over-year profit increase.
The addition of ING Direct helped boost profit at Scotiabank's Canadian personal and commercial bank by rose 23 percent to C$593 million. Scotiabank said last month it will rebrand the unit under the name Tangerine.
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 analysts' estimates of C$1.32.
"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 rose 3 percent to C$467 million ($438.64 million), held back by an 18 percent rise in loan-loss provisions and narrowing interest margins.
Speaking on a conference call, Chief Executive Brian Porter said the narrower margins were due to interest rate cuts in some of the bank's international markets.
"However, we anticipate that continued double-digit loan growth will mitigate these headwinds," he said.
Porter became CEO last month, replacing Rick Waugh, who had led the bank for 10 years.
Income at Scotiabank's global banking and markets division, its wholesale banking unit, fell 15 percent to C$344 million, mirroring a weak performance at most of the Canadian banks during the quarter.
Scotiabank's shares rose 1 percent to C$63.98 on Friday, although that followed three straight days of declines from near record-high levels for the bank. Year-to-date, it's shares are up 11.5 percent.
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.
"The one consistent factor (during the quarter) across all six Canadian banks was the strength in the domestic banking and I'm not positive you can extrapolate that into the future. I think that business has to slow down," said Lewandowski.
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.