TORONTO (Bloomberg) - Canadian stocks fell, sending the main equity index to its second straight weekly decline, as Royal Bank of Canada and other financial shares dropped on analyst reports that North American credit losses may widen.

Research In Motion Ltd. fell from a record after Wi-Lan Inc. said that it sued the maker of the Blackberry e-mail phones over wireless patents.

"People are scared about the financials," said John Stephenson, a portfolio manager who helps oversee about $1.5 billion at First Asset Investment Management Inc. in Toronto. "The US is a lot worse than people thought. The index had a very nice move up and will probably be weaker for a while."

Analysts in the US, where Royal Bank, Bank of Montreal and Toronto-Dominion Bank have subsidiaries, said worsening credit losses will reduce earnings at financial companies. Merrill Lynch & Co. said US regional-bank stocks are in "capitulation mode" and cut share-price estimates.

The Standard & Poor's/TSX Composite Index slipped 1.4 percent to 14,580.67 in Toronto. The Canadian benchmark retreated for a second day after rising to records in the prior two sessions, and had a weekly drop of 1.3 percent.

The S&P/TSX has still risen 5.4 percent this year as soaring commodities lifted energy and materials shares and Research In Motion surged on demand for its mobile phones.

Royal Bank, the nation's largest lender by assets, fell for a fourth day, sliding 2.6 percent to C$47.60. Bank of Montreal, Canada's fourth-largest bank, retreated 1.8 percent to C$43.89.

Bank of Nova Scotia, the third-biggest, slid 1.8 percent to C$49.62. Mexico, where Scotiabank's owns the Scotiabank Inverlat SA bank, unexpectedly increased its key interest rate on Friday.

Manulife Financial Corp., Canada's biggest insurance company, fell 2.9 percent to C$37.13. More than 10.9 million shares changed hands in Toronto, more than three times the average daily volume.

Manulife, which bought John Hancock Financial Services Inc. in the US for $13.9 billion in 2004, said on Friday that it will sell C$950 million in bonds.

It is also among BCE Inc. debt holders who persuaded a Quebec appeals court to block the C$52 billion ($51 billion) leveraged buyout of Canada's biggest phone company. They claimed the transaction was agreed to without adequately considering the negative impact on debt holders.

BCE and its buyers, led by Ontario Teachers' Pension Plan, were hoping the Supreme Court of Canada would overturn the appeals court ruling at 4.30pm in Ottawa. The Supreme Court, in a unanimous ruling, did overturn the lower court decision, reviving the BCE buyout.

Toronto-Dominion, Canada's second-biggest bank, is among the bondholders that sued and has also pledged to provide about C$3.5 billion in loans for the transaction.

"In the case that they overturn the court of appeal, it's pretty simple - everyone just drives on and the deal gets done," Toronto-Dominion Bank CEO Edmund Clark said yesterday, after an investor day in Mount Laurel, New Jersey. If the decision goes against the deal, the implications will depend on the wording of the decision, he said.

Toronto-Dominion fell two percent to C$65.05. BCE shares added 0.4 percent to C$34.60, below the C$42.75-a-share offer from Ontario Teachers and its partners.

For bondholders to be allowed to block the deal would go against the history of corporate M&A in the country, Mr. Stephenson said before the decision.

Research In Motion snapped a five-day rally and fell 1.3 percent to C$148 after rising to record the four previous days. Wi- Lan, an owner of patents for wireless technologies, said Research in Motion, Motorola Inc. and UTSTarCom Inc. are infringing two of its US patents with their mobile handheld devices and other equipment. Wi-Lan filed its lawsuit in federal court in Marshall, Texas. Wi-Lan shares rose the most since May 26, adding 11 percent to C$1.94.

Technology stocks in the S&P/TSX rose 5.7 percent this week. The group has advanced 22 percent this year for the best performance among 10 industries in the index. Research in Motion. accounts for more than four-fifths of the group's market capitalization of about C$99.4 billion.

A measure of financial shares was the biggest drag on the index last week, falling 2.9 percent.

Barrick Gold Corp., the world's biggest bullion miner, increased 0.6 percent to C$40.96. Smaller rival Goldcorp Inc. added 0.8 percent to C$41.37. Gold climbed 3.5 percent last week.

Gold futures climbed 3.5 percent this week in New York.