* Markets weigh on wealth management profits
* Banks cite investor confidence as challenge
* Assets under management inch up
By Andrea Hopkins
TORONTO, March 1 (Reuters) - Investor uncertainty and weak financial markets made it harder for Canada's big banks to make money in their extensive wealth management businesses this quarter, and executives offered only limited optimism for the months ahead.
Canada's two largest banks, Royal Bank of Canada and Toronto-Dominion Bank, said on Thursday profits in their wealth management units edged up in the three months ended Jan. 31 from the previous quarter.
But global market malaise and the long-term prospect of continued low interest rates have made it harder for the big lenders to make money on their mutual-fund, advisory, and investment services, which in previous quarters have helped power earnings at Canada's very profitable banks.
"Wealth management continues to be impacted by low interest rates and challenging markets, although we saw improving investor confidence toward the end of the quarter," Gord Nixon, chief executive at Royal Bank (RBC), the country's largest bank, said in his first-quarter earnings statement.
Net income at RBC's wealth management arm rose 5 percent to C$188 million ($190.64 million) from the previous quarter but was down 12 percent from a year earlier as higher average fee-based client assets failed to offset higher costs and lower trading volumes.
Wealth management profits at TD Bank, the No. 2 Canadian bank, edged up just 3.6 percent from the previous quarter to C$144 million, but they were up a strong 10.8 percent from a year earlier. The results excluded TD's stake in U.S. brokerage Ameritrade.
"The economic uncertainty experienced in the latter part of 2011 and into the first quarter of 2012 has put pressure on trading volumes in Wealth," TD said in a statement. It forecast "good growth" in 2012 due to cost controls, however.
Earlier this week, No. 4 lender Bank of Montreal said profits at its wealth management unit, known as the Private Client Group, fell 3.9 percent in its first quarter from the previous quarter to C$93 million, due largely to an employee compensation scheme that is expensed each year in the first quarter.
Income was up 27 percent year-over-year, as last year's acquisition of U.S. bank Marshall & Ilsley added assets under management and profit.
"Higher revenues from our acquisitions and higher than usual asset management revenues from a strategic investment were partly offset by lower brokerage revenues as a result of challenging equity market conditions," BMO said.
"We continue to attract new client assets and are starting to see some improvement in equity market conditions."
Wealth management profits: Bank Q1/12 Q4/11 Q1/11 y/y q/q
C$mln C$mln C$mln pct pct RBC 188 179 213 -12.0 5.0 TD* 144 139 130 10.8 3.6 BMO 93 97 73 27 -3.9
* TD excludes TD Ameritrade Assets under management at each of the three lenders edged higher in the quarter, reflecting a slight improvement in financial markets and net new client assets.
Assets under management: Bank Q1/12 Q4/11 Q1/11
C$bln C$bln C$bln RBC 313 306 305 TD 196 189 186 BMO 155 150 108
($1=$.0985 Canadian) (Reporting By Andrea Hopkins; editing by Peter Galloway)