(Updates with TD results, compares with estimates)
Aug 24 (Reuters) - Canada's largest bank Royal Bank of Canada (RBC) beat analysts' estimates for third-quarter profit on Thursday, helped by cost cutting and higher interest rates.
The country's second-largest bank Toronto-Dominion Bank , however, missed Bay Street estimates for quarterly profit as it set aside money to cover for unpaid loans. The bank's earnings were also impacted by a C$306 million charge related to the termination of its First Horizon acquisition.
The Bank of Canada has raised interest rates 10 times since March of last year to tackle sticky inflation, boosting profitability for banks' consumer businesses as they benefit from higher earnings from loans.
That helped boost earnings at RBC's retail business by 5%. At TD, income from its Canadian personal and commercial banking segment fell 1% and at the U.S retail unit it fell 9%.
The banks set aside more money for bad loans compared to the prior quarter as consumers struggle to make payments amid high costs of living.
RBC set aside C$616 million for credit losses, up from C$340 million a year ago, and TD set aside C$766 million, a jump from C$351 million.
RBC's CEO Dave McKay had said in May the bank would slow hiring after it overshot by thousands of people.
The bank said the number of full-time employees was down 1% from the prior quarter, and expects to further reduce headcount by about 1% to 2% in the current quarter.
Net interest income- the difference between what banks make on loans and pay out on deposits - rose 6.7% to C$6.29 billion at RBC and 3.5% to C$7.29 billion at TD.
RBC's profit came in at C$3.81 billion, or C$2.73 per share, in the three months ended July 31, compared with C$3.52 billion ($2.60 billion), or C$2.51 per share, a year earlier.
TD reported adjusted net income of C$3.73 billion , or C$1.99 per share, in the three months ended July 31, compared with C$3.81 billion, or C$2.09 apiece, a year earlier.
RBC reported adjusted earnings of C$2.84 per share, beating analysts' estimates of C$2.71 per share, according to Refinitiv data.
TD's adjusted earnings of C$1.99 per share fell below the estimate of C$2.04.
($1 = 1.3538 Canadian dollars) (Reporting by Nivedita Balu in Toronto, Sri Hari N S and Pritam Biswas in Bengaluru; Editing by Shilpi Majumdar and Mark Potter)
