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Canadian banks don't need taxpayer money to compete with bailed-out rivals in the United States, Bank of Nova Scotia's chief said Tuesday as his company reported a 67 per cent drop in fourth-quarter profit.

“I don't think government capital comes cheaply,” said Rick Waugh on a conference call with analysts. “When governments start to inject capital it's naive to think it doesn't come at a significant costs. There is pressure to refinance that as quickly as possible.”

The last three months have been brutal for banks around the world, as the credit crisis wreaked havoc on their balance sheets and pushed many to the brink of failure. Citigroup Inc., the largest bank to receive assistance from the U.S. government, received $20-billion (U.S.) in exchange for preferred shares late last month.

The Canadian government is not able to buy shares in financial institutions, but Finance Minister Jim Flaherty indicated in his fiscal update on Friday that the legislation could be amended to allow bailouts if any of the banks needed assistance.

Mr. Waugh said many of the U.S. banks that accepted government funding did so “whether they wanted to or not,” as he cautioned against accepting any capital that comes with strings attached.

“To our governments, regardless of who leads them – we are confident we do not need any subsidies or capital,” Mr. Waugh said.

Scotiabank's drop in profit was propelled by a $642-million after-tax writedown caused by bad investments. Profit was $315-million, or 28 cents a share, compared to $954-million, or 95 cents a share, in the same quarter last year. Total revenue fell to $2.49-billion from $3.08-billion.

The $642-million writedown was 7.9 per cent higher than the $595-million charge the bank warned investors to expect when it pre-released earnings in late November. Without the writedown, Canada's third-largest bank said it would have earned 93 cents a share.

“Clearly, 2008 was a difficult year, particularly with the writedowns we took in the fourth quarter. While Canadian banks have fared better than their counterparts in other parts of the world, none of us have been immune to the forces buffeting global markets,” Mr. Waugh said.

The bank's Scotia Capital division took the biggest hit in the fourth quarter, with profit down 80 per cent to $44-million from $229-million. International banking revenue was off 15 per cent, with profit at $227-million from $359-million a year ago.

However, the Canadian banking division saw profit increase by 6 per cent, helped by the acquisitions of Dundee Bank, Travelers Leasing, TradeFreedom and ETrade Canada. Profit was $466-million in the division, from $439-million last year.

“In 2009, we will be emphasizing two of our traditional strengths as key additional priorities: risk management and expense control,” Mr. Waugh said. “These priorities will be key success factors in the current environment.”

Calling the bank's performance “remarkably good despite charges on certain structured credit instruments, settlement losses on the Lehman Brothers bankruptcy and generally weak capital markets,” Mr. Waugh said the bank's 49 cent quarterly dividend will remain unchanged.

With the bank's shares trading at $34.36 on the TSX Tuesday, they yield 5.7 per cent.

“Our dividend remains well supported by both our earnings and high capital levels, which remain strong by global standards,” Mr. Waugh said.

For the full year, the bank said it took $822-million in writedowns. Profit fell 22.5 per cent to $3.14-billion, or $3.05 a share, from $4.05-billion, or $4.01 a share.

“The financial sector and the global economy will likely continue to experience significant uncertainty in 2009,” Mr. Waugh said. “However, Scotiabank's diversity – by business line, by product and by geography, including our presence in higher-growth emerging markets – leads us to anticipate moderate overall growth for the bank in 2009.”

Mr. Waugh's confidence wasn't shared by Dundee Securities Corp. analyst John Aiken, who said after the numbers were released that he would keep a “sell” rating on the bank's shares even though the company forecasted it would increase earnings-per-share by 7 to 12 per cent in 2009.

“Surprisingly, BNS did provide targets for 2009, but we are taking them with a grain of salt, given that we see much more volatility in and less visibility for earnings in the upcoming year,” he wrote in a note to clients.”