UPDATE 1-UnionBanCal posts lower 3rd qtr net; beats view

(Adds earnings from continuing operations, analyst estimates)

NEW YORK Oct 18 (Reuters) - UnionBanCal Corp UB.N, parent of Union Bank of California, said on Thursday net income fell in the third quarter, hurt by a fine related to suspected drug money, but narrowly exceeded estimates.

Net earnings fell to $127.5 million, or 92 cents a share, from $170.7 million, or $1.20 a share, in the year-earlier quarter.

Earnings from continuing operations for the San Francisco-based bank were $150.1 million, or $1.08 a share.

Excluding tax-related expenses, profit from continuing operations was $1.14 a share. On that basis, the results beat the average analyst estimate of $1.13, according to Reuters Estimates.

In after-market trading, UnionBanCal shares fell to $54.01 from a close of $54.34, down 42 cents, on the New York Stock Exchange.

In the past 12 months, the bank, a unit of Mitsubishi UFJ Financial Group Inc (8306.T), one of the world's biggest banks by assets, has seen its shares fall more than 12 percent, compared with a decline of 9 percent in the Philadelphia KBW Bank Index .BKX.

The latest quarter included a loss of $22.6 million, or 16 cents a share, to pay a penalty to the U.S. Department of Justice and for related expenses.

UnionBanCal had said it would be fined by federal authorities for failing to detect money from suspected drug sales after the bank had assured regulators that compliance programs were in place.

The bank had set aside a $10 million reserve in the second quarter to pay the penalties.

UnionBanCal said the penalties related to an international banking business sold in the third quarter of 2005.

UnionBanCal Chief Executive Masaaki Tanaka said higher deposit interest rates also put pressure on earnings.

He said UnionBanCal was "negligibly affected by the turbulence in the residential real estate and credit markets" since the bank was not engaged in subprime real estate lending.

UnionBanCal said it expected fourth-quarter earnings to be in the range of $1.07 to $1.12 a share, including a $15 million provision for credit losses. Analysts had previously estimated earnings of $1.16. (Reporting by Ed Leefeldt)