Royal Bank of Canada today reported slightly weaker profit for the third quarter ended July 31 despite growth in loans and deposits.

Net income under Canadian GAAP was $746 million, down $37 million or 5% from a year ago, and diluted earnings per share were $1.12, down $.04 or 3%.

Return on equity was 16.8% compared to 17.4% a year ago.

Total revenues were up $103 million or 2% from a year ago. The bank said revenues benefited from the acquisition this quarter of the Canadian operations of Provident Life and Accident Insurance Company (Unum Provident), strong growth in loans and deposits, and higher revenues from mutual funds and from Global Services, which together more than offset the impact of deposit spread compression.

Non-interest expense increased $139 million or 5% from last year’s third quarter, largely reflecting higher benefit costs, increased occupancy costs and the acquisition of Unum Provident.

The provision for credit losses was $125 million, down from $167 million in the third quarter of 2003, due to fewer new problem loans and the reversal of specific allowances, reflecting the favourable resolution of a number of earlier problem loans.

“Our performance this quarter reflected continued strong asset quality, solid growth in loans and deposits and higher revenues from insurance and mutual funds but, also reflected continued spread compression on deposits and higher benefit costs,” said Gordon Nixon, President & CEO.

The bank declared a quarterly dividend of 52¢ per common share.

It also announced the implementation of a dividend reinvestment plan.

Royal Bank shares were down $1.94 to $61.06 in late morning trading.