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Bank of Nova Scotia (NYSE:BNS) revealed that the earnings contribution from its Mexican operations will be C$74-million in the fourth quarter as rising credit provisions more than offset the revenue growth driven by higher assets and deposits, improving margins and solid non-interest revenue growth.

This represents a 6% decline on a quarterly basis and 31% from a year ago, noted Dundee Securities analyst John Aiken.

He said in a research note:

Although not a drastic sequential decline, it is illustrative of the slowdown anticipated in Scotia’s international operations as many of the countries it operates in will likely be negatively impacted by the U.S. recession.

He added that the year-over-year decline is more telling.

The analyst expects earnings will continue to be under pressure in coming quarters and said “spiky” provisions for the bank in Mexico and the Caribbean are a real risk going forward.

Mr. Aiken rates Scotiabank a “sell” with a C$36 price target.

Source: Decline at Bank of Nova Scotia