TORONTO - Royal Bank (TSX:RY) said Thursday it is raising its dividend as earnings increased 73 per cent in the third quarter, marking its highest quarterly profit ever.

The bank's quarterly dividend will increase by five per cent to 60 cents per share, after already boosting its dividend earlier this year — by six per cent in the first quarter.

Earnings grew to $2.24 billion, equal to $1.47 per share, partly on strength in its Canadian consumer banking and loan operations. That compared with earnings of $1.29 billion or 83 cents per share in the year-earlier period.

On an adjusted basis, diluted earnings were equivalent to $1.31 per share, which was above the expectations of $1.18 from analysts, according to Thomson Reuters.

Total revenue was $7.76 billion, also beating analyst expectations of $7.22 billion, versus the reported $6.9 billion a year earlier.

"While market conditions remain uncertain, RBC has good momentum and a strong competitive position in our core markets, as well as a solid pipeline," said president and CEO Gordon Nixon in a conference call.

"We believe we're well positioned to continue to extend our lead in Canada, and build on strong client relationships in select U.S. and international markets while delivering long-term growth to our shareholders."

Excluding certain items, net income from continuing operations was $1.978 billion, up 18 per cent from last year, due mainly to record earnings in Canadian banking and strong performance in capital markets.

Canadian banking net income represented just over half of the bank's quarterly earnings, amounting to a record $1.13 billion, which was up $239 million compared with last year. Royal said it benefited from more customers taking out mortgages, and making transactions on their credit cards.

In the wealth management division, profits dropped by $36 million to $156 million as it was affected by regulatory and legal expenses as well as lower transaction volumes.

International banking operations posted a net loss of $31 million, affected by an $11-million cost related to the acquisition of RBC Dexia and a higher provision for credit losses in its Caribbean banking operations.

Sales in its insurance division performed better than a year ago, rising 27 per cent to $179 million, partly on lower claim costs in Canada.

Capital markets results almost doubled to $486 million, an increase from $259 million a year ago, mostly on higher fixed-income trading results.

Barclays analyst John Aiken said in a note that Royal reported what was one of the strongest quarters, when compared to its peers.

"Royal managed to earn through a weaker capital markets quarter on the back of a strong performance within wholesale lending," he wrote.

In other developments, the bank also announced that former Canada Pension Plan Investment Board chief executive David Denison would be joining the company's board of directors. He retired from the CPPIB in June.

Royal Bank is the country's largest bank by assets and market capitalization and has 80,000 employees serving more than 15 million clients. The bank has operations across North America and in 51 other countries.

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