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financial institutions

A Scotiabank location in Toronto.Deborah Baic/The Globe and Mail

The story of Canadian bank earnings in the fourth quarter has been one of soaring profits, driven by higher consumer borrowing and a rebound in trading activity in the markets. As Bank of Nova Scotia unveiled its fourth-quarter earnings on Friday, Canada's third-biggest lender stuck closely to that script.

Scotiabank, the last of the Big Six banks to report earnings, increased its profit 31 per cent in the fourth quarter, driven by higher loan growth in Canadian banking and a surge in trading revenues compared to a dismal quarter a year ago.

The bank made $1.52-billion in the quarter, or $1.18 a share. That compared to profit of $1.16-billion, or 97 cents a share, a year ago. Revenue rose 15 per cent to $4.9-billion.

The results beat analysts' expectations. On a cash basis, Scotiabank made $1.21 a share. Analysts expected earnings of about $1.19 a share.

It was a record year for the bank, as it was for several of its peers. For the 2012 financial year, Scotiabank made $6.46-billion, an increase of 21 per cent, the highest annual income it has recorded.

"Scotiabank had strong overall results this year with record net income and revenues and very good contributions from each of our four business lines," Scotiabank chief executive officer Rick Waugh said in a statement.

Provisions for credit losses, or the amount of money banks set aside to cover bad loans, rose to $321-million, from $281-million a year ago.

Scotiabank's Canadian banking operations made $481-million, up 15 per cent, as the bank saw strong growth in mortgages and deposits. Residential mortgages grew by $11-billion or 8 per cent, while personal loans grew $3-billion or 6 per cent, the bank said.

At a time when margins are being squeezed across the sector due to higher competition for loans and persistent low interest rates, Scotiabank managed to keep its margins from shrinking in Canadian banking.

"Canadian banking had a very good quarter," Mr. Waugh said. "There were higher deposit volumes in retail, commercial and small business banking and margins remained stable."

The bank recently expanded its Canadian business with the acquisition of ING Direct Canada, a lender that focuses on low-fee online banking. That deal will help boost deposits going forward, Scotiabank said.

Scotiabank's international division, with operations in more than 50 countries from Latin America to Asia, made $453-billion, an increase of 22 per cent. In particular, those earnings were boosted by the recent purchase of Banco Colpatria in Colombia, the bank said.

The Global Banking and Markets division, which includes the bank's investment banking operations, made $396-million, a 62-per-cent increase.