UPDATE 1-National Bank of Canada profit tops estimates
* Stronger trading, wealth management income drive profit beat
* Shares up 1.3 percent on results, touch 17-month high
(Adds business segment results, background, estimates, stock reaction)
TORONTO, Aug 28 (Reuters) - National Bank of Canada reported a stronger-than-expected 10.6 percent rise in quarterly profit on the back of higher wealth management and trading income, pushing its stock to a 17-month high on Wednesday.
Shares of the Canada's sixth-largest bank, the third Canadian lender to report results for the quarter, were up 1.3 percent at C$80.27 in morning trading in Toronto.
Net income rose to C$419 million ($398.84 million), or C$2.39 per share, in the third quarter ended July 31, from C$379 million, or C$2.14 per share, a year earlier.
Excluding a C$37 million reversal of income tax provisions, C$6 million in charges for retention bonuses on wealth management acquisitions, and other items, earnings rose to C$2.22 a share from C$1.98. That was well ahead of the profit of C$2.06 that analysts expected, according to Thomson Reuters I/B/E/S.
The news follows market-beating results from larger rivals Bank of Montreal and Bank of Nova Scotia on Tuesday.
But while those banks topped estimates due mainly to strong domestic lending income, National benefited from its proportionally large financial markets division, which includes trading, investment banking, and other advisory services.
"The earnings beat was driven by trading revenues and fee income," CIBC World Markets analyst Robert Sedran said in a research note.
Income from the financial markets arm jumped 42 percent to C$158 million, which the bank attributed mainly to higher trading revenue, while wealth management profit climbed 33 percent to C$52 million.
The personal and commercial segment posted a slim gain of 2 percent to C$192 million, as growth in personal loans barely offset the impact of narrowing interest margins. Margins have been under pressure across the sector as tight competition forced the banks to lend at cheap rates.
Earlier this month, National announced plans to buy Toronto-Dominion Bank's institutional services business for C$250 million and said the deal would boost earnings per share by 12 Canadian cents in 2014 and 14 Canadian cents in 2015.
National Bank Chief Executive Officer Louis Vachon said in a statement that the bank is continuing to seek out opportunities.
Royal Bank of Canada and TD, the country's two largest banks, as well as No. 5 lender Canadian Imperial Bank of Commerce, will report results on Thursday.
($1 = $1.0505 Canadian)
(With additional reporting by Euan Rocha; Editing by Jeffrey Hodgson and Lisa Von Ahn)