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Scotiabank President and CEO Rick Waugh prepares for the annual general meeting at the World Trade and Convention Centre in Halifax, Nova Scotia, March 3, 2009.

PAUL DARROW/PAUL DARROW/REUTERS

What does a bank have to do to impress the analysts these days?

Bank of Nova Scotia put up results on Tuesday that substantially beat expectations, with the most international of Canada's big banks earnings $1.02 a share in the latest quarter, well over the consensus forecast profit of 93 cents.

In recognizing who helped contribute to this performance - which stands in contrast to missed expectations at three rival banks - CEO Rick Waugh made a point of highlighting the skills of traders at Scotia Capital. The investment dealer earned $391-million, up from $328-million in the same quarter a year ago.

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The analysts promptly knocked the bank for producing low quality earnings, that depend in part on unpredictable revenues from currency, bond and equity desks.

"While Scotia still beat after accounting for these items, quality was still quite low, in our opinion, with higher than expected trading revenues and gains on securities," said Barclays Capital analyst John Aiken.

In a first take on Scotiabank's results, CIBC World Markets analyst Robert Sedran also highlighted the unexpected strength of the trading team, explaining in a report that "trading revenue of $419-million (up 4 per cent quarter-over-quarter and 27 per cent year-over-year) was stronger than expected (we were at $375 million)."

However, both analysts said Scotibank's results will well received by investors, in the wake of a sell off in bank stocks last week that followed disappointing numbers.

"Even after taking into account some of the unusual items that provided a lift this quarter, the number was ahead of expectations. Especially when compared against the softer results reported by peers last week, we view the results positively," said Mr. Sedran.

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About the Author
Business Columnist

Andrew Willis is a business columnist for the Report on Business at The Globe and Mail, based in Toronto.He has been in business communications and journalism for three decades. More

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