National Bank of Canada's quarterly profit misses estimates as trading slows

Aug 27 (Reuters) - National Bank of Canada NA.TO reported a quarterly profit on Wednesday that missed analysts' estimates, hurt by weakness in its capital markets segment as trading activity slowed amid lower volatility, sending the Montreal-based lender's shares down 3.5%.

National Bank is the first big Canadian bank to miss profit estimates in the current earnings season, despite following the broader trend of lower-than-expected loan loss provisions in its third quarter.

The bank's capital markets segment, which accounts for over a third of its income, benefited earlier this year as market volatility due to uncertainty over the Trump administration's tariffs policy boosted trading activity.

For the three months ended July 31, net income totaled C$334 million, down 33% from the prior quarter amid high uncertainty related to U.S.-Canada trade.

On a per-share basis, the bank earned C$2.68, missing analysts' average estimate by 1 Canadian cent.

"While the performance was far from abysmal, there were several negatives to point to including a poor capital markets result, a step back in efficiency and domestic margin contraction," Jefferies analyst John Aiken said.

Shares of National Bank were down C$5.30 to C$145.11 in early afternoon trading on the Toronto Stock Exchange.

National Bank has focused on growing its footprint outside of the province of Quebec, particularly in Western Canada, setting it apart from most other large Canadian banks that have looked to the U.S. market for growth.

Earlier this year, it bought Alberta-based Canadian Western Bank in a C$5 billion ($3.62 billion) deal.

National Bank's net interest income, the difference between what banks earn on loans and pay on deposits, surged more than 52% to C$1.17 billion in its third quarter.

The bank's wealth management profit grew 12% to C$244 million.

Its adjusted net income rose to C$1.10 billion from C$960 million a year earlier.

TD Bank TD.TO and CIBC CM.TO are scheduled to report their quarterly earnings on Thursday.

($1 = 1.3817 Canadian dollars)