TORONTO (Bloomberg) - Canadian financial stocks fell, led by Royal Bank of Canada, after Merrill Lynch & Co. posted its widest quarterly loss on writedowns of US sub-prime home loans.

The benchmark equity index was little changed after EnCana Corp., the nation's largest natural-gas company, led energy shares higher on crude oil's first gain in four days.

"Merrill's was a really bad set of numbers," said Gavin Graham, who helps oversee about $5.3 billion as chief investment officer at Guardian Group of Funds in Toronto. "Our banks did not do a bunch of this stuff. It shows it's not contained. They've not cleaned it all up."

The Standard & Poor's/TSX Composite Index rose 1.02 to 14,088.15, after falling as much as 153.76, or 1.1 percent. The equity benchmark fell 2.3 percent on Oct. 19, the most in almost three months, when disappointing earnings from US companies including Wachovia Corp. stoked concern that Canada's biggest trade partner is headed for an economic slump.

Royal Bank, Canada's biggest lender by assets, today dropped 84 cents to C$52.90. Smaller rival Toronto-Dominion Bank fell 95 cents to C$68.22. Canadian Imperial Bank of Commerce, the nation's fifth-biggest bank, declined C$1.75 to C$96.55. Manulife Financial Corp., the country's largest insurer, retreated 25 cents to C$41.25.

Merrill had a $2.24 billion loss in the third quarter after $7.9 billion in writedowns for subprime mortgages and asset-backed bonds, the most by any Wall Street company. Merrill failed to meet its own forecast and the deficit, its first in six years, dimmed the outlook for investment bank earnings.

A gauge of financial shares, the biggest by value of the 10 industry groups in the S&P/TSX, dropped 0.9 percent. It has slipped 1.7 percent in 2007 amid concern earnings will be hurt by turmoil in credit markets. If the shares don't rebound by yearend, it would be the group's first annual decline since 2002.

EnCana added C$1.04, or 1.7 percent, to C$63.39, the biggest gain in almost two months. Oil for December delivery rose $1.83, or 2.2 percent, to $87.10 a barrel on the New York Mercantile Exchange after the Energy Department reported that US oil and gasoline inventories unexpectedly declined. Prices are up 47 percent from a year ago.

Research In Motion Ltd. fell 11 cents to C$120.31. The stock gained 8.2 percent yesterday and the company had its price estimate raised to C$145.43 ($150) from $125 at UBS AG after it announced a plan to start selling its BlackBerry e-mail phone to business customers in China.

The technology company's market valuation rose higher than Royal Bank's in early trading, to become Canada's largest company, before the shares fell, leaving it number two again.

UBS kept its "buy" rating on Research In Motion. By contrast, analysts at TD Newcrest cut the company to "hold" from "buy" today, citing the "strong stock price appreciation."

"It's a great company and we own lots of it," Mr. Graham said. "But we've been trimming it all along on the way up, because the valuation is not sustainable."

Nexen Inc. dropped 59 cents, or two percent, to C$29.40 for a 8.4 percent decline this year. The worst performer among Canada's largest oil and gas producers reported third-quarter profit that missed forecasts. Excluding a C$55 million gain for stock-based compensation and other one-time items, Nexen earned 67 cents a share, spokesman Sean Noe said in an interview. On that basis, the results missed the average estimate of 76 cents in 12 analyst reports compiled by Bloomberg.