Source: The Canadian Press

Bank of Nova Scotia (TSX:BNS) has reported a 21% increase in its quarterly profit compared with a year ago and hinted that it may look to raise its dividend.

Chief executive Rick Waugh said Friday the bank would raise its dividend payout ratio — the percentage of earnings paid to shareholders — to between 40 and 50%.

“This is consistent with our actual payout ratios since the fourth quarter of 2007 and well within industry parameters,” Waugh said.

“It provides us with greater flexibility to increase our dividend while still investing for growth.”

The bank’s dividend payout ratio had been between 35 and 45%.

Scotiabank earned just under $1.1 billion or $1 per diluted share for the quarter ended Oct. 31 compared with a profit of $902 million or 83 cents per share a year ago.

Cash earnings per share was $1.02 on a diluted basis, up from 85 cents per share last year and ahead of analyst estimates of $1 per share, according to those survey by Thomson Reuters.

Overall revenue for the three months ended Oct. 31 was $3.94 billion, up from $3.74 billion in the fourth quarter of fiscal 2009.

Scotiabank’s annual profit rose to $4.24 billion, up nearly $692 million or about 20% from 2009, and annual revenue was $15.79 billion.

The bank’s return on equity for the year was 18.3%, while its Tier 1 capital ratio for the year was 11.8%.

Scotiabank’s Canadian banking business provided more than half the overall profit in the quarter, with $567 million in net income — up 13% or $64 million from last year — as it increased revenue and reduced provisions for credit losses.

Barclays Capital analyst John Aiken noted Scotiabank’s results were in line with expectations.

“While not a stand-out quarter, relative to what we have seen from the big five banks that have reported to date, Scotia’s results will likely be very well received on a relative basis,” Aiken wrote in a note to clients.

“Scotia was negatively impacted by the expense growth that we have seen with its peers, up 8%, but was relatively more contained and was offset to a greater degree by revenue growth.”

Stonecap Securities analyst Brad Smith said the Scotiabank results topped his expectations.

“Overall a very encouraging end to the year with clear signs of rising profitability in the international segment, which we continue to view as a key profit driver over the medium term,” Smith wrote.

Last month, Scotiabank signed a deal to buy the rest of DundeeWealth (TSX:DW), a money manager that runs the Dynamic family of mutual funds in Canada, that it did not already own for $2.3 billion.

The deal beefs up its global wealth management division, which became its own operating segment in September.

DundeeWealth is a publicly traded subsidiary of Dundee Corp. (TSX:DC.A) that provides investment management, securities brokerage, financial planning and investment advice.

Scotiabank initially bought an 18% minority stake in DundeeWealth in 2007, paying $348 million while it also bought Dundee Bank for $260 million. Its offer for the remaining stake in DundeeWealth pegs the company’s full value at about $3.2 billion.

Scotiabank shares closed up $1.66 at $55.63 on the Toronto Stock Exchange on Friday.