Bank of Nova Scotia said its fourth-quarter profit climbed 7.3% as provisions for credit losses fell from the year-before period.

Net income for the quarter ended October 31 was $708 million, or 69¢ a share, up from $660 million, or 63¢, in the year-before period.

The improved profit was driven chiefly by a reduction in loan-loss provisions to $40 million from $120 million. Return on equity, meanwhile, inched higher to 18.8% from 18.6% in the year-before period.

But thin interest margins and a damaging rise in the Canadian dollar — which hurt income from Scotia’s extensive international operations — narrowed overall revenue by $96 million to $2.5 billion. The bank said it does not expect relief from these burdens in the near term.

“Looking ahead to 2005, we fully expect continued pressure on our margins and ongoing challenges due to the appreciation of the Canadian dollar,” Scotia’s chief executive, Richard Waugh, said in a release.

Net income from Scotia’s domestic banking operations fell 3% to $255 million, while international banking income rose 6% to $165 million.

Income at brokerage until Scotia Capital rose 10% to $244 million, helped by lower credit losses.

For 2005, the bank targeted earnings per share growth between 5% and 10%, return on equity between 17% and 20%, and a productivity ratio of less than 58%.

Scotia has operations in about 50 countries, and has shown signs that it wants to expand internationally, with domestic bank mergers still on hold.

For the full year, Scotia had a record net profit of $2.93 billion, up 18% from $2.48 billion in 2003, with a strong return on equity of 19.9%. This was driven primarily by lower credit losses.

Scotiabank also raised its quarterly dividend by 2¢ to 32¢a share.