August 30, 2011 / 12:22 PM / in 6 years

UPDATE 4-Scotiabank profit rises 22 pct, shares climb

* Q3 cash EPS C$1.14 vs est C$1.12

* International banking, wealth management drive profit

* Shares rise 2.2 pct to C$53.50 (Adds comments from conference call, updates share price)

By Cameron French

TORONTO, Aug 30 (Reuters) - Bank of Nova Scotia’s BNS.TO quarterly profit rose nearly 22 percent on higher income from its expansive international operations and a boost to wealth management from the acquisition of asset manager DundeeWealth.

The result, which was slightly ahead of analysts’ expectations, pushed the bank’s shares up by 2.2 percent on Tuesday.

Profit was driven by Scotiabank’s international division, which spans about 50 countries, mostly in Latin America and Asia. Scotiabank has made several small international acquisitions since the 2008 financial crisis.

“It was overall a very positive quarter as Scotia managed to hit our expectations with, in our view, high quality earnings,” Stonecap Securities analyst Brad Smith said in a note.

However, he noted that an 18 percent increase in expenses outpaced a 13 percent increase in revenue, which the bank said was due to growth initiatives that inflated costs during the 2011 period.

Cost controls have been a focus for banks over the last several months as low interest rates have kept a lid on the rates they can charge for personal loans and mortgages, which are their bread-and-butter products.

Speaking on a conference call, Scotiabank Chief Executive Rick Waugh said he expected the cost pressure to come off somewhat in 2012, but said the bank was well prepared to handle an unexpected turn in the economy.

“We can react if the revenue’s not there. We’ll react in a measured way,” he said, adding that layoffs or asset sales were not being contemplated.

Indeed, Scotiabank officials said the bank would continue to follow its strategy of making selective acquisitions.

International banking income during the quarter rose 27 percent, as stronger commercial lending made up for slim personal loan growth.

STOCK RISES

Profit rose to C$1.29 billion ($1.32 million), or C$1.11 a share, up from a profit of C$1.06 billion, or 98 Canadian cents, in the year-before period.

On a cash basis, the bank earned C$1.14 a share, slightly ahead of analysts’ expectations of a profit of C$1.12 a share.

The bank’s stock ended the session up 2.2 percent at C$53.50, outperforming its rivals and the 1 percent rise of the S&P/TSX composite index .GSPTSE.

Scotiabank is the fourth Canadian bank to report this quarter.

Bank of Montreal BMO.TO kicked off reporting season with a robust report early last week, but that was followed by disappointing results National Bank of Canada NA.TO and Royal Bank of Canada RY.TO.

Canadian Imperial Bank of Commerce CM.TO and Toronto-Dominion Bank TD.TO, which like Scotia are heavily dependent on retail banking revenues, will report results over the next two days.

ACQUISITION

Profit at Scotiabank’s Canadian banking division, its largest, climbed 4 percent on loan growth, while income at the bank’s capital markets division fell 5 percent.

Barclays Capital analyst John Aiken said the capital markets unit suffered a “weak quarter”, but that was not out of line with other banks that have reported.

Wealth management income gained 12 percent on the DundeeWealth acquisition [ID:nN1E77T0L4].

Scotiabank’s wealth management holdings include a 36 percent stake in asset management firm CI Financial CIX.TO.

$1=$0.98 Canadian Reporting by Cameron French; editing by Peter Galloway

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