Royal Bank of Canada beat analysts' expectations by posting a 24 per cent surge in third-quarter profits on Thursday.

A strong performance by its capital markets division offset losses in international banking and a sharp rise in provisions for credit losses.

Royal Bank CEO Gordon Nixon listens to a question at a news conference following the company's annual general meeting in Toronto. The bank posted a 24 per cent increase in profits on Thursday. (Adrian Wyld/Canadian Press)

The Toronto-based bank reported net income of $1.6 billion, or $1.05 per share, for the quarter ended July 31. The bank posted profits of $1.3 billion, or 92 cents per share, during the same period last year.

Cash net income, which excludes certain one-time items, totalled $1.21, soundly beating estimates of 92 cents per share from analysts surveyed by Thomson Reuters.

"Our record results this quarter reflect the strength of our franchise and our ability to take advantage of opportunities and drive efficiencies," Royal Bank chief executive officer Gordon Nixon said

"We are building on our strong competitive positions and successfully executing against our long-term strategy. Our performance this quarter demonstrates the competitive advantage of our diverse business mix."

The capital markets division drove gains, posting $562 million in profits for the quarter, up 52 per cent from last year's level.

Canadian banking profit declines

The Canadian banking division's profit declined to $669 million.

"Higher unemployment levels have had an impact on loan portfolios and the low-interest environment in keeping pressure on retail margins," Nixon said on a conference call to discuss the results.

The international banking division's net losses increased to $95 million, a big spike from the $16-million loss last year. Higher provisions for credit losses in U.S. banking was blamed for the loss.

Overall provisions surged more than 40 per cent to $770 million, a $436-million increase over year-earlier levels.

Profits from insurance increased 18 per cent to $167 million.

The bank's Tier 1 capital ratio, a key performance metric measuring the amount of money held in reserve, was 12.9 per cent at quarter's end.

The bank also held its quarterly dividend steady at 50 cents per share.

With files from The Canadian Press