Bank of Nova Scotia (BNS.TO), Canada's third-biggest lender, reported improved first-quarter earnings that appeared to be just ahead of market expectations but which underwhelmed banking analysts.

Scotiabank said net income in the first quarter to Jan.31 was $2 billion compared with $1.8 billion the year before. Earnings per share rose to $1.58 from $1.44 the year before. Analysts had on average forecast earnings per share of $1.57, according to Thomson Reuters I/B/E/S data.

However, Barclays analyst John Aiken said that earnings were boosted by a gain of around $40 million on the sale of real estate in Canada and an unquantified gain on an investment in Colombia.

"Therefore, the view of earnings is either $1.55 or a low quality $1.58 and will likely be viewed disappointing against consensus (and our) forecast of $1.57," he said.

RBC Capital Markets analyst Darko Mihelic said he viewed the results as "mildly negative".

"Even assuming that the market interprets Scotiabank's earnings as $1.58 per shares -- this would be close to in line with consensus whereas other banks beat consensus estimates handily," he said. 

Rival Bank of Montreal (BMO.TO) on Tuesday reported earnings which were well ahead of market forecasts. Royal Bank of Canada (RY.TO) and Canadian Imperial Bank of Commerce (CM.TO) also reported forecast-beating results last week.

Scotiabank, which has the biggest foreign presence of any Canadian bank, is focusing its international strategy on the Pacific Alliance, a Latin American trade bloc comprising Mexico, Peru, Chile and Colombia.

The four countries, which formed a trading alliance in 2011, have a growing middle class and an average age of under 30 and were identified by Scotiabank executives as having exceptional potential for growth.

However, some banking analysts have questioned whether Mexico remains as attractive given policies being pursued by U.S. President Donald Trump who wants to reform a trading agreement between the U.S., Mexico and Canada.

Scotiabank reported an 18 per cent increase in net income at its international business to $576 million. Net income at its Canadian banking business grew by 12 per cent to $981 million. Its investment banking business lifted net income by 28 per cent to $469 million.

Steve DiGregorio, portfolio manager at Canoe Financial stressed the positives in the performance of Canadian banks. 

“The stability of earnings in the Canadian banks, you have to say this is pretty remarkable,” he told BNN Tuesday.  “Right across the board, all four parts of these banks are looking very good. All the Canadian banks, they look expensive at today’s multiples; they don’t look so expensive if you extrapolate this out.”

“As a Canadian, I feel a little bit vindicated. U.S. guys were out shorting us about a year and a half ago, two years ago. … We’ve proved them wrong,” he added. 

-- With files from BNN