May 29 (Bloomberg) -- Royal Bank of Canada and National Bank of Canada reported profit declines as writedowns on subprime debt overshadowed higher revenue from consumer banking and insurance.

Royal Bank, the largest lender, said profit in the three months through April fell 27 percent to C$928 million ($941 million). National Bank's net income declined 29 percent to C$165 million. Canadian Imperial Bank of Commerce, the fifth- largest bank, had a loss of C$1.1 billion, or C$3 a share.

The three banks booked combined writedowns of about C$3.46 billion, bringing the total for Canadian lenders in the past year to almost C$10 billion, a fraction of the $382 billion reported by the biggest global banks. Canada's central bank said this week it will reduce emergency loans to the country's lenders as the seizure of credit markets eases.

``They're enormously profitable still,'' said Gavin Graham, Chief Investment Officer at Toronto-based Guardian Group of Funds Ltd., which manages about $5.7 billion, including bank shares. ``If your worst-case scenario is you won't grow your earnings in the middle of the worst credit crunch in 15 years, well that's a nice problem to have.''

Royal Bank rose C$1.07, or 2.2 percent, to C$50.53 at 4:10 p.m. trading on the Toronto Stock Exchange. National Bank, the No. 6 lender, climbed 68 cents, or 1.3 percent, to C$53.08. CIBC, which reported its second straight loss, fell C$1.39, or 2 percent, to C$69.46.

Credit Derivatives

Toronto-based Canadian Imperial suffered the most from the collapse of the U.S. mortgage market after expanding in trading of credit derivatives more rapidly than domestic rivals. It booked C$2.5 billion of writedowns in the quarter, the top end of analysts' estimates. CIBC's subprime losses account for about two-thirds of the total for Canadian banks.

Royal Bank had C$854 million in pretax writedowns on investments tied to U.S. subprime mortgages and other debt securities, in line with its May 14 estimate. Montreal-based National Bank had C$73 million in costs for its holdings in asset-backed commercial paper.

``This is a tough environment for the banks,'' said David Cockfield, a money manager at Toronto-based Leon Frazer & Associates Inc., which manages about C$2 billion, including bank stocks.

Consumer-Banking Boost

Canada's six biggest lenders reported the first profit declines in at least nine years, and missed most analysts' estimates because of writedowns and lower capital markets fees.

Canadian Imperial's profit excluding one-time items was C$1.63 a share, missing the C$1.78 median estimate of 11 analysts surveyed by Bloomberg. Toronto-based Royal Bank earned 72 cents a share before some items, short of the C$1 median estimate of 12 analysts. Royal Bank earned C$1.03 a share on that basis, beating National Bank Financial analyst Robert Sedran's estimate by two cents.

Royal Bank's profit was bolstered by a 15 percent increase in consumer-banking profit to C$708 million. Earnings from insurance, mortgages and deposits in Canada helped offset a 43 percent drop in profit from international consumer banking, which includes Raleigh, North Carolina-based RBC Bank.

Profit at National Bank's consumer bank rose 1 percent to C$113 million. At CIBC, by contrast, earnings from retail banking fell 18 percent to C$509 million on a decline in revenue from mortgages and consumer lending.

CIBC Job Cuts

``The only constant with CIBC is its ability to continually disappoint as far as its credit experience is concerned,'' said Guardian's Graham. ``And here we are again.''

CIBC World Markets, the investment-banking unit, had a C$1.64 billion loss after taking a C$1.46 billion charge on debt securities guaranteed by U.S. bond insurers.

To stem losses, Chief Executive Officer Gerald McCaughey, 52, agreed to sell most of the firm's New York-based investment- banking business to Oppenheimer Holdings Inc. in November and ousted CIBC World Markets head Brian Shaw in January. The bank said today it plans to cut 100 jobs at CIBC World Markets, reducing the division's workforce by more than 15 percent.

``In a perverse way, the higher charges are positive as they reflect more rapid writedowns of problem assets,'' BMO Capital Markets analyst Ian de Verteuil said today in a note. ``Simply put, there is only another C$2 billion to go.''

Earnings from Royal Bank's investment bank fell 96 percent to C$13 million as it set aside C$349 million for bad loans, up 85 percent from a year ago. Earnings at National Bank's financial markets business declined 10 percent to C$80 million.

Royal Bank kept its dividend unchanged at 50 cents a share for the fourth consecutive quarter, the longest stretch without an increase since 1999.

``We have refrained from increasing the dividends so far this year, but over the long haul we'll continue to raise dividends and our track record is pretty good,'' Chief Operating Officer Barbara Stymiest said today in an interview.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

Last Updated: May 29, 2008 16:23 EDT