Toronto Dominion Bank Thursday reported a third quarter profit of $1.18-billion, or $1.29 a share, up 29% as record results from Canadian retail lending made up for slumping capital markets operations.

The numbers fell just shy of analyst estimates.

"This pretty much followed the trends set by the other big banks, the big winner was personal and commercial banking and that's always been TD's strong point," said John Kinsey, a portfolio manager at Caldwell Securities Ltd. in Toronto. "Everybody is concentrating on [lending]."

Canada's second biggest bank has bet heavily on U.S. expansion and while that business has proved troublesome because of the tough economy south of the border, it will likely stay the course and not give up, Mr. Kinsey said.

"I think they are going to be patient," he said, adding that that may not be the case for some of TD's peers that are also struggling in the U.S.

TD's U.S. personal and commercial business had net earnings of $282-million, compared with $271-million in the same period last year.

The Tier 1 Capital Ratio was 12.5% at the end of the quarter, up from 11.1% last year.

TD is the last of the big banks to report for the three months ended July 31 and the results continue a theme established by its peers of strengthening core lending operations offset by declining wholesale banking.

As credit markets return to more normal levels the banks have been hurt by fewer market opportunities and lower client trading revenue.

Provisions for credit losses were $339-million, down from $365-million in the prior quarter and from $1.2-billion last year.

Wealth Management had a profit of $179-million, up 10% on increased client fee revenue and higher net interest margins.

Domestic personal and commercial lending had a profit of $841-million, up 24% on the back of growing revenues and a drop in provisions for bad loans.

TD's adjusted net earnings were $1.43 a share, down from $1.47 in 2009.

That compares with analysts consensus estimate of around $1.45.

Andre Hardy, an analyst at RBC Capital Markets, called the results "neutral," noting that loan losses were lower than he predicted.

"Our retail businesses continue to perform very well and leave us positioned to deliver a good year," said Ed Clark, the chief executive. "We're confident that our excellent capital levels, recent acquisitions and the investments we've made in the business will help ensure that we continue to grow despite the continuing economic challenges."

Wholesale banking had net income of $179-million, down 45% from last year amid exposure to the European sovereign debt crisis and falling equity markets.

The results come on the heels of a report by Moody's warning that the Canadian banks are taking on increased risk as they grow their capital markets operations and that investors need to be watchful.