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TORONTO, Dec 1(Reuters) - Royal Bank of Canada missed estimates for fourth-quarter profit on Wednesday, with a 19% increase from a year earlier driven largely by the release of reserves set aside to cover bad loans, and said it would raise its dividend by 11%.

The country's biggest lender increased its quarterly dividend to C$1.20 a share, up from the C$1.08 it has paid the last six quarters. It also said it would repurchase up to 45 million common shares, representing about 3.16% of its outstanding shares.

Royal Bank reported an adjusted profit of C$2.71 a share, compared with C$2.27 a year earlier. Analysts had expected C$2.81.

Much of the improvement was driven by the release of about C$227 million of reserves. Excluding the impact of provisions and taxes, Royal Bank's earnings rose a more muted 4% from a year ago to C$4.76 billion.

Its retail banking business saw loan growth of 9%, but while small business lending more than doubled from a year ago, other loans outside of mortgages pulled back. ($1 = 1.2749 Canadian dollars) (Reporting by Nichola Saminather and Mehnaz Yasmin in Bengaluru; Editing by Aditya Soni and Louise Heavens)