By Nivedita Balu and Pritam Biswas

he Bank of Nova Scotia (Scotiabank) logo is seen outside of a branch in Ottawa, Ontario, Canada, February 14, 2019. REUTERS/Chris Wattie/File Photo Purchase Licensing Rights

Dec 3 (Reuters) -Bank of Nova Scotia reported fourth-quarter earnings below analysts' expectations and warned about modest economic growth in key international markets including Mexico, sending shares of Canada's third-largest bank down about 3% on Tuesday.

Bay Street had been optimistic on the bank's prospects, upgrading its ratings and betting on CEO Scott Thomson's plan to focus on growth closer to home and the North American trade corridor, while holding back on spending in its less profitable markets in South America.

Scotiabank kicked off fourth-quarter earnings for the big six Canadian banks, drawing investors' attention to credit woes as consumers struggle to pay back high-interest loans.

The lender forecast fiscal 2025 earnings growth between 5% and 7%, excluding the impact of its KeyCorp stake purchase, as it braces for new governments in the U.S. and Mexico. Analysts on average were expecting 9% growth, according to LSEG data.

The bank expects its provision for credit losses to remain slightly elevated in the first half of the year and trend positively through the end of 2025.

Executives told analysts on a call that while growth is expected to be positive, it would be more modest than previously projected with less certainty on near-term growth, particularly in Mexico through the period of the presidential transition.

"Investors today are not focusing on the long term. They're focusing on what was right in front of them," TD Cowen analyst Mario Mendonca said, pointing to management's comments on the economies of Mexico, Chile and Peru growing slower next year.

"Mexico is such a big part of the Scotiabank story that when they guide lower on Latin America, it's going to have an effect on the stock price," Mendonca added.

Meanwhile, Scotiabank, like its peers, has set aside large sums of money to shield against potentially souring loans as an elevated interest rate environment made it challenging for clients to pay back loans.

Edward Jones analyst James Shanahan noted that credit costs will continue to put pressure on Scotiabank's future earnings amid slow loan growth.

On a per-share basis, Scotiabank earned C$1.57, compared with analysts' expectations of C$1.60 per share. Adjusted profit rose 29% to C$2.12 billion ($1.51 billion), powered by higher interest income and growth at its Canadian banking business.

Scotiabank's provision for credit losses fell to C$1.03 billion in the quarter, from C$1.26 billion last year.

Net interest income, the difference between what a bank earns on loans and pays out for deposits, rose 5.5% to C$4.92 billion.