* RBC is biggest miss as strong Canadian dollar bites
* TD, CIBC also come in slightly below expectations
* Shares mixed, but mostly lower (Adds National Bank results, updates shares to close)
By Andrea Hopkins
TORONTO, May 27 (Reuters) - Profits at three of Canada's biggest banks rose, but fell short of lofty expectations on Thursday, held back by trading headwinds, a strong currency and a heavier tax burden.
Results at a smaller fourth lender, National Bank of Canada (NA.TO), managed to meet analyst expectations, but not before its shares fell in tandem with most of its peers.
The largely disappointing results took the shine off news that loan losses continued to recede at Royal Bank of Canada (RY.TO), Toronto-Dominion Bank (TD.TO), Canadian Imperial Bank of Commerce (CM.TO).
RBC, the nation's largest bank, said the stronger Canadian dollar took a big bite out of capital markets and wealth management revenues in the second quarter, offsetting strong domestic banking operations.
TD Bank, Canada's second-largest lender, and No. 5 CIBC also missed market expectations, though by smaller margins. CIBC was hurt by weak trading revenues and lower than expected advisory fees, while TD's capital markets revenues were down from the previous quarter.
"While lower than anticipated provisions for credit losses helped all, each of the banks struggled with various aspects of revenue growth, which lowered earnings relative to expectations," Barclays Capital analyst John Aiken said.
National, Canada's No. 6 lender, hit expectations on the back of higher retail loan volumes.
But, for the most part, Thursday's trend ran counter to forecast-topping results released on Wednesday by Bank of Montreal (BMO.TO).
RBC shares sank 4.4 percent to C$56.85 during the session, while CIBC dropped 4.3 percent to C$72.02, and National Bank eased 1.6 percent to C$58.07.
TD edged up 0.8 percent to C$73.38, while BMO built on its gains from the previous day, rising 3.4 percent to C$62.30.
All of the big banks are benefiting from strong Canadian operations and and improving credit performance after recession-linked loan losses. Even so, various unrelated headwinds tempered overall profits, analysts said.
"When you look at some underlying results in terms of performance from the domestic banking, performance in credit, it's encouraging for a long-term sustained recovery in earnings for the banks," Edward Jones analyst Craig Fehr said.
"However, on any quarter, given how high expectations have gone, there is a possibility for disappointment. And it looks like RBC's headline number at first blush is probably the one that stands out most," Fehr said.
RBC's core cash earnings per share, which include the amortization of intangibles, were 96 Canadian cents. While overall profit was up 40 percent when one-time items are excluded from year-ago results, the profit missed expectations.
Analysts, on average, had expected a profit of C$1.09 a share, according to Thomson Reuters I/B/E/S.
Net income came in at C$1.33 billion ($1.27 billion) in the second quarter ended April 30, compared with a loss of C$50 million in the same period a year earlier, when RBC took a C$1 billion goodwill impairment charge for losses in the bank's U.S. operations.
The Toronto-based bank said the strengthening of the Canadian dollar cut revenue by C$534 million, net income by C$82 million and per-share earnings by 6 Canadian cents, with the capital markets segment particularly hard-hit.
The Canadian dollar appreciated by 5 percent against the U.S. dollar over the fiscal quarter, a move that depresses earnings from U.S. operations when profits are translated to Canadian dollars. RBC, TD and BMO all have sizable U.S. bank segments as well as some international earnings.
Still, RBC's provisions for credit losses, or the amount of money set aside to cover bad loans, fell 48 percent to C$504 million and Tier 1 capital was 13.4 percent, at the high end of domestic peers and well above most global rivals.
Cross-town rival TD, which has recently made small acquisitions to expand its U.S. footprint, earned C$1.18 billion in the quarter, up from C$545 million, as loan losses fell to their lowest level in six quarters.
Adjusted income was C$1.36 a share, while analysts on average were expected a per share profit of C$1.38.
Provisions for credit losses fell to C$365 million in the quarter from C$772 million a year earlier.
Tier 1 capital, a key measure of the capital adequacy of a bank, was 12.0 percent, at the low end of Canadian peers.
CIBC, meanwhile, posted lower than expected quarterly earnings of C$660 million, though up from a year-before loss of C$51 million. Excluding items, cash earnings were C$1.46 per share, versus analyst expectations of a C$1.50 per share.
$1=$1.05 Canadian Additional reporting by Cameron French in Toronto and Sakthi Prasad in Bangalore; editing by Rob Wilson