03/03/2015 11:07 EST | Updated 05/03/2015 05:59 EDT

Scotiabank increases Q1 profit to $1.73B; looks to Mexico for growth

TORONTO - The Bank of Nova Scotia is looking to grow its operations in Mexico, a region that's expected to benefit from the U.S. economic recovery.

"Mexico is a market that we're very interested in," Scotiabank chief executive Brian Porter told investors after the company reported its first-quarter earnings Tuesday.

"We believe there's another round of bank consolidation in Mexico. We would definitely like to be a player across the board. Whether it's a commercial bank or a retail bank — we'd have an interest."

Scotiabank (TSX:BNS) was the last of the big five banks to report first-quarter results. Combined, Canada's top lenders — Royal Bank (TSX:RY), TD Bank (TSX:TD), Scotiabank, Bank of Montreal (TSX:BMO) and CIBC (TSX:CM) — earned $8.2 billion of net income during the quarter, up from $8.1 billion a year ago. Their combined revenues during the quarter totalled $31.7 billion, compared to $29.9 billion previously.

Scotiabank also increased its quarterly dividend Tuesday by two cents a share to 68 cents per share.

The bank earned a profit of $1.73 billion or $1.35 per diluted share for the quarter ended Jan. 31, up from $1.71 billion or $1.32 in the comparable year-earlier period. Revenue rose to $5.96 billion from $5.73 billion.

Adjusted diluted earnings were $1.36 per share, up from $1.34.

Analysts were expecting adjusted earnings of $1.38 per share and revenue of $5.9 billion, according to estimates compiled by Thomson Reuters.

The bank said the improvement was driven by higher net interest income, driven by asset growth and higher interest margin, as well as growth in wealth management revenues and the positive impact of foreign currency translation.

Those were partly offset by increased provision for credit losses, higher non-interest expenses and lower contribution from investments from associates.

The bank also increased its exposure to the troublesome oilpatch, growing its portfolio of oil and gas related loans by 20 per cent to $15.4 billion.

Barclays analyst John Aiken noted Scotiabank's impaired oil and gas-related loans climbed to $107 million from $49 million during the previous quarter.

"Not only did its oil and gas outstanding loans increase significantly, it also incurred some notable credit deterioration within these exposures, which are receiving heightened attention by the market," Aiken said in a note to clients.

However, the bank said the loan losses were not related to the drop in energy prices, and Aiken said he was "buoyed" by the bank's strengthening international results.

"We do not believe that the issues affecting Scotia's oil and gas exposures relate to any broader deterioration," Aiken said. "It is simply bad timing."

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