(Adds share price, loan loss provisions across banking industry, fund manager comment.)
By Nichola Saminather and Bharath ManjeshR
Aug 29 (Reuters) - TD Bank Group, Canada's second-biggest lender by market value, said third-quarter profit rose as growth in its U.S. retail business outweighed higher loan-loss provisions and subdued margins that have also hit rivals.
The bank posted 11% growth in adjusted earnings in its U.S. retail business and a surprise 9% increase in wholesale banking, which includes capital markets and investment banking, while Canadian retail income rose 3.4%.
TD Bank shares rose 0.8% to C$72.10 in morning trading in Toronto, while the Toronto stock benchmark gained 0.7%.
Total loan-loss provisions at TD Bank climbed 17% to C$655 million ($493.41 million) in the quarter, better than the C$689 million analysts had expected.
Amid mixed results, top banks in the country, including Royal Bank of Canada and Bank of Montreal, have raised the amounts set aside to cover bad loans.
Montreal-based lender Laurentian Bank of Canada on Thursday said loan-loss provisions jumped to C$12.1 million in the third quarter, from C$4.9 million a year earlier.
Total loan-loss provisions at Canada's six biggest banks jumped 27% to C$2.45 billion in the three months ended July 31 from a year earlier, much of that driven by bad loans in the oil and gas industry.
"The energy sector has some concerns broadly across the Canadian economy, so it probably makes sense to increase provisions for credit losses in that sector," Greg Taylor, chief investment officer at Purpose Investment, said in an interview.
"Canadian commercial banking has been a bit better than expected, capital markets was expected to be light and it was," he added. "While a lot of people are concerned about the inverted (U.S. Treasury) yield curve, it doesn't seem to be affecting earnings yet."
TD, the last major Canadian lender to report results for the quarter ended July 31, warned of margin compression from slowing economic growth and uncertainties stemming from trade concerns and Brexit. A three-basis-point increase in net interest margins in TD's Canadian retail operation was more than offset by a six-basis-point drop in the U.S. retail business.
"We do see some compression in margins that can arise from the overall interest rate environment," Chief Financial Officer Riaz Ahmed said, adding that this "is good for the economy and could possibly be mitigated by volume increases and better credit performance."
The bank's net income rose 4.6% to C$3.25 billion ($2.45 billion), or C$1.74 per share, from a year earlier. (reut.rs/2MHvDiM)
On an adjusted basis, the lender earned C$1.79 per share. Analysts had expected earnings per share of C$1.80, according to IBES data from Refinitiv. ($1 = 1.3275 Canadian dollars) (Reporting by Nichola Saminather in Toronto and Bharath Manjesh in Bengaluru; Editing by Shinjini Ganguli and Jonathan Oatis)