TORONTO (Reuters) - Toronto's main stock index climbed yesterday for a third straight session in a rally sparked by better than expected bank earnings and stronger oil prices.

Financials and energy stocks were among the biggest contributors to the index's rise, with Royal Bank of Canada up 6.4 percent at C$31.90, and Suncor Energy up 11 percent at C$25.66.

The financial sector rose 6.2 percent and the energy group was up 4.4 percent.

Three of the country's largest banks — Royal Bank, Canadian Imperial Bank of Commerce and National Bank of Canada — reported quarterly profits that were hit hard by market-related charges, but underlying results excluding one-time items beat street expectations.

"The Canadian banks have shown performance that was actually better than expected," said Rick Meslin, head of Canadian equities at UBS. "Clearly, banks have been very, very strong today following some of the positive earnings reports."

CIBC rose 6.1 percent to C$45.91, and National Bank climbed 9.7 percent to C$37.69.

"When you see people kind of meeting or beating consensus in big sectors that have been sold down you kind of have this prejudice to want to cover your shorts and get long," added Meslin.

The Toronto Stock Exchange's S&P/TSX composite index rose 254.52 points, or 3.21 percent, to 8,186.82, with eight of its 10 main groups higher. Consumer staples issues slid 0.4 percent and information technology shares dropped 0.3 percent.

It is the third straight session of gains for the benchmark index, which has drawn support from a recent rally in beaten-down financial stocks, said Bruce Latimer, a trader at Dundee Securities.

"The banks came up with some good numbers, oil is up $2 and there's some bottom-fishing going on in the golds. You've got strength across the market," he said.