* Q3 adj EPS C$1.57 vs est C$1.52
* Markets income drops 42 pct on weak trading
TORONTO, Aug 26 (Reuters) - National Bank of Canada (NA.TO) said on Thursday its third-quarter profit fell 10.6 percent, as weak trading activity hurt the bank's financial markets business.
Canada's sixth-largest bank earned a net C$271 million ($256 million), or C$1.56 a share, in the quarter ended July 31. That compared with a year-earlier profit of C$303 million, or C$1.78 a share.
Excluding items, profit was an adjusted C$1.57 a share, the bank said.
Analysts polled by Thomson Reuters I/B/E/S had expected, on average, a profit of C$1.52 a share, before items.
Profit from the bank's financial markets division fell 42 percent to C$98 million due to lackluster markets, the bank said.
National's tier 1 capital -- a key measure of stability -- was 13.0 percent, up from 10.7 percent a year earlier. Return on equity was 17.7 percent. ($1=$1.06 Canadian) (Reporting by Cameron French, editing by Gerald E. McCormick)