UPDATE 3-Scotiabank 4th-quarter profit rises, energy concerns remain

(Adds comments from CFO, paragraphs 4-6)
By John Tilak
TORONTO, Dec 1 (Reuters) - Bank of Nova Scotia BNS.TO
reported a higher quarterly profit on Tuesday, helped by asset
growth and favorable foreign exchange moves, but weakness in its
capital markets business and an increase in bad energy loans
kept the optimism in check.
Shares of Scotiabank , Canada's third-largest bank, added 0.5
percent.
A rise in bad loans and provisions for loan losses in the
energy sector highlighted worries about the bank's oil and gas
presence in an environment of weak commodity prices.
The bank's drawn corporate oil and gas exposure of C$16.5
billion forms 3.5 percent of its total loan book.
"We're very comfortable with that portfolio. We think it's
in good shape," said Chief Financial Officer Sean McGuckin, who
noted that the lender has completed about 70 percent of its
planned borrowing base redeterminations.
For two thirds of those companies, Scotiabank has either
confirmed current levels or increased those limits, he said in
an interview.
"We've not relaxed terms," McGuckin added.
Canadian banks have remained profitable despite concerns
about a sluggish domestic economy and the impact of the oil
price slump. The lenders are active with both retail and
commercial clients in the energy sector.
Scotiabank's gross impaired loans in the oil and gas
industry rose to C$165 million from C$96 million in the third
quarter and C$44 million a year earlier.
Provisions for credit losses in the sector were C$24
million, compared with none a year earlier.
"The market at some point may be concerned about the
continued increases in exposure to oil and gas," said Edward
Jones analyst James Shanahan, who noted that bad loans reported
were still a small number for the bank.
"They are making incremental loans to commercial concerns in
the oil and gas industry at a time when oil prices remain very
low," he added. "That's concerning to me."
Scotiabank also named Ignacio Deschamps strategic advisor,
global digital banking, to Chief Executive Brian Porter.
Deschamps is a former chairman and chief executive officer of
BBVA (MC:BBVA) Bancomer, Mexico's biggest bank.
Net income for the fourth quarter ended on Oct. 31 rose to
C$1.84 billion ($1.38 billion), or C$1.45 per share. Analysts on
average had expected C$1.43 a share, according to Thomson
Reuters I/B/E/S.
Domestic banking earnings rose 19 percent and adjusted
profit at its international banking segment climbed 33 percent.
But its global banking and markets division recorded a 14
percent drop in net income.
($1 = 1.3317 Canadian dollars)