BMO profit jumps on U.S. unit, lower loan losses

Tue Feb 28, 2012 4:51pm EST
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By Cameron French

(Reuters) - Bank of Montreal's (BMO.TO: Quote) profit topped expectations for the first quarter as lower losses for bad loans and a revenue boost from last year's acquisition of U.S. bank Marshall & Ilsley more than offset weaker capital markets income.

The result, which drove BMO's shares up by 1 percent on Tuesday, comes as bank executives are trying to control costs due to concerns that consumer lending will dry up and lending profit margins will narrow.

As expected, personal and commercial lending at the bank's flagship Canadian operation dipped year-over-year. But interest margins narrowed less than expected, and even rose from the fourth quarter.

"(Net interest margin) was a real positive in Canada," said National Bank Financial analyst Peter Routledge.

All told, Canada's No. 4 bank earned C$1.1 billion ($1.1 billion), or C$1.63 a share, up 34 percent from a year-earlier profit of C$825 million, or C$1.34 a share.

Adjusted profit was C$1.42 a share, topping analysts' average estimate of C$1.36 a share.

Weighing on the result was a 24 percent drop in income from BMO's capital markets division. Investment banking and trading revenue had been expected to pale next to an abnormally strong quarter a year earlier, but nevertheless fell short of what analysts had expected.

U.S. PROFITS   Continued...