* Ex-items EPS at both banks top estimates
* Wholesale banking income helps drive results
* TD dividend up 9 percent, but could be last increase this year
* CIBC boosted by cards deal, ups dividend by 2 percent
By Cameron French
TORONTO, Feb 27 (Reuters) - Toronto-Dominion Bank and Canadian Imperial Bank of Commerce both posted better-than-expected quarterly profits and raised their dividends on Thursday, benefiting from recent acquisitions and strong wholesale banking income.
The results, which pushed shares of both lenders higher, built on generally stronger-than-expected results from rivals Royal Bank of Canada, Bank of Montreal and National Bank of Canada earlier this week.
With a slowdown in Canadian lending growth, the banks have sought to expand other facets of their operations, both internally and through acquisitions.
"The core engine of the Canadian banks relative to where they've been in the past is not firing on all cylinders, however what we are seeing is the benefits of diversification that the banks have put in place," Barclays Capital analyst John Aiken said in an interview.
TD said income from wholesale banking, which includes trading, underwriting, and investment banking, rose 44 percent in the quarter, while CIBC's wholesale banking profit rose 26 percent.
TD, Canada's second-largest bank, earned C$2.04 billion ($1.84 billion), or C$1.07 a share, in the fiscal quarter ended Jan. 31, up from a year-earlier profit of C$1.78 billion, or 93 Canadian cents a share.
Excluding items, it earned C$1.06 per share. That was ahead of analysts' expectations of a profit of C$1.04 per share.
"We just had a really strong quarter all around in wholesale," Colleen Johnston, TD's chief financial officer, said in an interview. "We had good trading revenue, certainly well above what we expect to be our normal level."
No. 5 bank CIBC said profit jumped 50 percent to C$1.18 billion, or C$2.88 a share, from C$785 million, or C$1.88 a share.
Excluding a $183 million gain on the sale of half of its Aeroplan credit card portfolio to TD, as well as other smaller items, it earned C$2.31 a share, topping estimates of C$2.16.
CIBC shares were up 1.9 percent at C$92.30 just before midday, while TD edged up 16 Canadian cents to C$49.58.
ACQUISITIONS, LOAN GROWTH
TD's Canadian retail banking income rose 5 percent to C$1.3 billion on an adjusted basis, while U.S. retail banking profit rose 8 percent to $463 million on the back of last year's acquisitions of Target Corp's U.S. credit card portfolio and asset manager Epoch Investments.
While domestic loan growth at the banks has slowed from the double-digit gains of the past decade, it has not ground to a halt, in spite of signs the housing market is cooling and data showing Canadian consumers with record personal debt levels after a decade of heavy borrowing.
"Everybody keeps talking about the headwinds and perhaps mortgage lending being down, but so far they seem to be pretty good," John Kinsey, a portfolio manager at Caldwell Securities, which manages shares of Canada's five biggest banks, said in an interview.
At CIBC, Canadian retail and business profits surged 29 percent to C$746 million, while its wealth management division earned C$114 million, up 28 percent on the year.
CIBC has been seeking deals to boost its wealth management unit, and last month completed the acquisition of U.S. manager Atlantic Trust for $210 million.
The bank also agreed in September to sell about half of its Aeroplan Visa card portfolio to TD in a deal that avoided a potential legal battle over the right to issue the valuable flight rewards card.
Both banks hiked their dividends, with CIBC boosting its payout by 2 percent to 98 Canadian cents a share, and TD hiking its payout by a robust 9 percent to 47 Canadian cents a share.
However, TD CFO Johnston said the dividend increase might be the only one for the bank in 2014, which would break its past cycle of one increase every second quarter.
Bank of Nova Scotia will be the final big Canadian bank to report when it releases results on Tuesday.
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