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(Adds comments from analyst, portfolio manager; background on n GE asset deal; share move)
By John Tilak
TORONTO, Feb 23 (Reuters) - Bank of Montreal, Canada's fourth-largest lender, posted a higher quarterly profit that topped market expectations on Tuesday, lifted by growth in its U.S. retail banking business.
However, bad loans in the energy sector shot up in the first quarter, reflecting the impact of a collapse in the oil price and signaling that the Canadian banks were not immune to the oil-related slowdown in Western Canada.
Gross impaired loans in the oil and gas sector jumped C$162 million ($118.15 million), from none recorded in the year-earlier period and C$102 million in the fourth quarter.
Provisions for that sector's credit losses climbed to C$22 million, from virtually zero a year earlier.
Energy sector loans account for 2 percent of BMO's total loan portfolio, and the oil-producing province of Alberta makes up about 6 percent of its loan book.
"There's no cause for panic at this point over the bank's energy exposure and the increase in bad loans, said David Cockfield, managing director and portfolio manager at Northland Wealth Management, which owns shares of BMO.
"It's worth watching, but getting too excited about it? Not yet," he said.
Cockfield said one area of concern in the numbers was the increase in non-interest expense, which was up 8.8 percent at C$3.27 billion.
BMO shares climbed 2.2 percent to C$75.48 in early trading in Toronto.
The lender's earnings quality was somewhat weak and the company benefited from a favorable tax rate, Edward Jones analyst James Shanahan said.
"This is not a great quarter, but it's not a disaster either," he said.
Net income for the first quarter ended Jan. 31 was C$1.07 billion, or C$1.58 per share, compared with C$1 billion, or C$1.46 per share, a year earlier. Excluding special items, earnings were C$1.75 per share.
Analysts on average had expected C$1.72 a share, according to Thomson Reuters I/B/E/S.
The company recorded a 31 percent increase in earnings at its U.S. personal and commercial banking division and an 18 percent rise at its capital markets unit. Canadian retail banking earnings were 5 percent higher, while net income fell at its wealth management unit.
The U.S. retail banking business benefited from the completion of the acquisition of General Electric Capital Corp's transportation finance business in the first quarter. (Reporting by John Tilak; Editing by W Simon)