National Bank of Canada today reported net income of $243 million in the third quarter of fiscal 2007, an increase of 10% over the same period of 2006.

Diluted earnings per share totalled $1.48, up 14% from $1.30 in the third quarter of 2006.

Had it not been for the gain related to the MasterCard Inc. IPO in the third quarter of 2006, the increase in diluted earnings per share would have been 18%.

Between the third quarter of 2006 and the third quarter of 2007, the bank’s total revenues grew 10% to $1,010 million. Return on common shareholders’ equity stood at 20.6%, an increase of 40 basis points.

“In achieving net income of $243 million in the last quarter, National Bank proved that it could continue growing its business while conducting an in-depth review of its business strategies in order to maximize the potential of its current growth platform,” said Louis Vachon, president and CEO, in a release.

The bank saiid its expects to buy about $2 billion in short-term debt under a previously announced initiative to ease liquidity problems.

As of August 24, the bank purchased approximately $1 billion of asset-backed commercial paper from eight National Bank mutual funds, approximately $90 million from six funds operated by Altamira Investment Services Inc. and approximately $560 million from pooled funds. “The balance is expected to be purchased shortly,” the bank said.

The bank added it “is in contact with other customers who hold ABCP acquired through the bank or its subsidiaries and is working with them to attempt to resolve their liquidity and other issues in the context of their overall banking relationship.”

“At this time, the bank can not quantify the financial impact, if any, of these initiatives mainly for two reasons. First, most of such ABCP has been issued by non-bank sponsored conduits which are subject to a restructuring proposal, which is at a very formative stage and the outcome of which could have a material effect on the value of such ABCP. Second, there is insufficient information available about the current value of the assets which underlie the ABCP being purchased and about any other contingent liabilities which may exist.”

“The magnitude of the sums involved and the uncertainties referred to above could give rise to a material charge to the bank’s earnings. The bank will address this issue when it publishes the fourth quarter results for fiscal 2007,” it concluded.

Total revenue grew 10% in the third quarter to $1,010 million, as against $921 million in the same quarter of 2006.

Total revenue for personal and commercial was up 2% in the third quarter of 2007. Business growth was tempered by a decline in the net interest margin from 2.88% in the third quarter of 2006 to 2.78% this quarter. In addition, revenue growth was reduced by the adjustments to the actuarial reserves for insurance operations.

Total revenuew for the wealth management segment was up 9% in the third quarter of 2007 from the year-earlier period of 2006, attributable to the strength of private investment management, mutual funds and retail brokerage activities.

Net income in the segment rose 9% to $38 million from $35 million in the third quarter of 2006.

Assets totalled $106.3 billion due to the increase in assets administered by retail brokerage, mutual funds and private investment management.

Total revenue for financial markets rose 28% to $312 million in the third quarter of 2007 – or 31% to $320 million, adjusted for non-controlling interest – due to higher financial market fees and trading revenues.

Net income in segment jumped 43% to $96 million, compared to $67 million in the corresponding period of 2006.