May 29 (Bloomberg) -- Royal Bank of Canada, the country's biggest bank, said profit fell for a second straight quarter on subprime debt writedowns and higher loan losses at its U.S. consumer bank.

Net income for the period ended April 30 fell 27 percent to C$928 million ($939 million), or 70 cents a share, from C$1.28 billion, or 98 cents, a year earlier, the Toronto-based bank said today in a statement. Revenue fell 13 percent to C$4.95 billion.

``The writedowns are the biggest factor -- you're talking essentially one-third of earnings,'' Dundee Capital Markets analyst John Aiken said in an interview.

Debt writedowns of C$436 million and higher provisions for credit losses in the U.S. led to the first consecutive profit declines in four years. The bank said the slump will make it harder to meet financial targets for the year after earnings per share dropped 23 percent in the first two quarters, short of its goal of 7 percent to 10 percent growth.

``We are not happy about these writedowns and continue to be impacted by higher provisions for credit losses in our U.S. banking business,'' Chief Executive Officer Gordon Nixon said in the statement.

Royal Bank said the writedowns on investments tied to U.S. subprime mortgages and other debt securities reduced revenue by C$854 million, just under the C$855 million estimate announced on May 14. The costs add to the C$787 million in costs reported in the previous two periods.

Estimates

Excluding one-time items, Royal Bank said it earned 72 cents a share, less than the C$1 a share median estimate of 12 analysts polled by Bloomberg News. The debt writedowns cut profit by C$436 million, or 33 cents a share, the bank said.

National Bank Financial analyst Robert Sedran said Royal Bank earned C$1.03 a share excluding one-time items, beating his estimate of C$1.01 a share on that measure.

Royal Bank is the fourth Canadian lender to post lower second-quarter profit, as a sluggish economy, rising provisions for bad loans and a slump in capital markets fees erode earnings. Canada's economy is forecast to grow at its slowest pace in 16 years in 2008 as a strong dollar and weak U.S. economy curb exports, according to Bank of Montreal.

Royal Bank rose 48 cents to C$49.46 yesterday on the Toronto Stock Exchange. The stock has fallen 2.5 percent this year, compared with a 3.5 percent decline for the nine-member Standard & Poor's/TSX Banks Index.

Loan Losses

Royal Bank set aside C$349 million for bad loans, up 85 percent from C$188 million a year ago.

Consumer banking profit in Canada rose 15 percent to C$708 million from C$618 million, on higher results from insurance and an increase in consumer lending and deposits. Profit from international consumer banking, which includes Raleigh, North Carolina-based RBC Bank, fell 43 percent to C$38 million as rising loan defaults pared profit.

Earnings from the RBC Capital Markets investment-banking unit fell 96 percent to C$13 million from writedowns of C$714 million before tax, and as equity financings and takeovers in Canada slowed.

RBC Capital Markets advised Canadian companies on $61.9 billion worth of takeovers that closed in the quarter, down 35 percent from $94.6 billion a year ago, according to Bloomberg data. The firm managed $408.5 million in equity sales during the period, down 78 percent from $1.85 billion a year earlier.

Wealth management, which includes sales of mutual funds, fell 6.2 percent to C$182 million from C$194 million a year ago.

Toronto-Dominion Bank, the No. 3 lender, said yesterday that net income fell 3.1 percent to C$852 million, the first profit decline in five quarters.

Bank of Nova Scotia and Bank of Montreal, the second- and fourth-biggest banks, said profit fell 5.7 percent and 4.3 percent, respectively. The three banks missed analysts' profit estimates.

Canadian Imperial Bank of Commerce, the fifth-biggest bank, and National Bank of Canada, the sixth-biggest lender, report results later today.

(Royal Bank will hold a conference call to discuss second- quarter earnings at 12:30 p.m. at +1-416-340-2216 or 1-866-898- 9626. The call will also be broadcast on the Internet at www.rbc.com/investorrelations/ir_events_presentations.html)

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

Last Updated: May 29, 2008 08:56 EDT