UPDATE 1-Canadian banks expect to benefit from Bank of Canada rate hike

(Adds comment from Scotiabank CEO)

TORONTO, Sept 6 (Reuters) - Royal Bank of Canada and Bank of Nova Scotia, two of Canada's biggest lenders, said on Wednesday that the Bank of Canada's decision to raise interest rates would boost their profits over the next year.

The central bank surprised many when it hiked rates on Wednesday and left the door open to more rate increases in 2017 even as it pledged to pay attention to how higher borrowing costs would hit Canada's indebted households.

RBC's Chief Executive Dave McKay said he expected the decision to raise interest rates to add more than C$300 million ($245 million) to the bank's revenues over 5 years.

"I would say a 25-basis-point increase in rates should benefit our retail franchise in the first year roughly by C$100 million but increase to upwards of C$300 million by year five as it takes a while to blend into the portfolio," McKay said at the Scotiabank Financials Summit.

Scotiabank CEO Brian Porter said that the latest hike and a previous increase of 25 basis points in July would add 2 to 3 basis points in 2018 to the net interest margin achieved by the bank's Canadian business. He did not quantify how much revenue that equates to.

($1 = 1.2225 Canadian dollars) (Reporting by Matt Scuffham; Editing by Chizu Nomiyama and Meredith Mazzilli)