Bank of Nova Scotia reported a modestly higher profit for even as provisions for bad loans more than doubled, the bank said Tuesday.

“Loan losses have been manageable, but rose as expected in both the retail and commercial portfolios compared to the same period last year due to deteriorating economic conditions,” the bank said.

Net income was $842 million, or 80¢ a share, for the fiscal first quarter, ended Jan. 31, compared with $835 million, or 82¢ cents share, a year earlier.

Earnings per share fell even as net income increased as preferred share dividends paid out rose to $37 million from $21 million a year earlier. Preferred share dividends are deducted after net income has been calculated.

Return on equity, a key measure of profitability, slipped to 16.9% during the quarter, compared to 18.3% a year ago.

“All three of our business lines delivered revenue growth through increases in volumes, net interest and other income. The business lines benefitted from broadly diversified revenues and a strong focus on risk and expense management,” said Rick Waugh, president and CEO, in a release.

“Unfortunately, the impact of unprecedented and volatile financial markets offset this growth through higher funding and capital costs and declines in the fair value of our securities portfolio. This environment will present continuing challenges to achieving some of our growth objectives,” Waugh said.

Provisions for credit losses jumped 153% to $281 million in the quarter, compared to $111 million in the first quarter of 2008.

Canadian retail banking was the largest contributor to the bank’s results, with domestic branches posting a $438 million profit in this quarter, up 18% over the previous year.

Profit from international banking rose 34% to $388 million, partly due to the depreciation of the Canadian dollar.

Scotia Capital, the bank’s investment banking division, made a $300 million profit, up 57% from the first quarter of 2008.

The bank maintained its quarterly dividend at 49¢ a share.

IE