* Adjusted EPS C$1.44 vs analyst estimate C$1.36
* U.S. acquisition, wealth management boost profit
* BMO first of Canada's banks to report Q2 results
* Shares rise 1.5 percent
By Cameron French
TORONTO, May 23 (Reuters) - Bank of Montreal's 2011 acquisition of U.S. lender Marshall & Ilsley helped drive its profit up by a higher-than-expected 27 percent in the second quarter, giving the bank's shares a slight boost despite lingering concerns over slowing retail lending.
BMO, the first Canadian bank to report results for the fiscal second quarter, paid $4.1 billion for Wisconsin-based M&I last July, part of a wave of takeovers by Canadian banks in the wake of the 2008 financial crisis.
The deal doubled BMO's already sizeable U.S. branch count, and contributed C$171 million to its bottom line during the quarter, both by driving up revenue and due to lower than expected loan losses.
Overall BMO earned C$1.03 billion ($1.01 billion), or C$1.51 a share, up from a year-before profit of C$813 million, or C$1.32. Adjusted profit was C$1.44 a share, topping analysts' expectations for a profit of C$1.36.
But looking beyond the M&I takeover, narrower loan margins in the quarter showed that BMO's main lending businesses are facing tougher conditions, said National Bank of Canada analyst Peter Routledge.
"Their overall retail operations look like they're suffering through slow growth both in Canada and the United States, and margin pressure, particularly in Canada," he said.
He said the profit beat was due in part to cost controls.
The company's shares opened lower on the Toronto Stock Exchange, but rose late in the session as the market rallied. The stock closed 1.5 percent higher at C$56.06, the strongest performer among Toronto-listed banks.
"BMO's earnings do little to dissuade our belief that the banks' second-quarter earnings are likely to be solid, but not spectacular," Barclays Capital analyst John Aiken said in a note.
Royal Bank of Canada and Toronto-Dominion Bank , Canada's two biggest lenders, both report quarterly results on Thursday.
Bank of Nova Scotia, Canadian Imperial Bank of Commerce and National Bank of Canada all report next week.
Historically low interest rates have squeezed banks' profit margins on loans, particularly mortgages, while fears of a domestic housing bubble and high consumer debt have fueled concern that loan growth could stall.
These pressures have sparked heavy competition for mortgages, and BMO has been particularly aggressive, briefly introducing heavily discounted 2.99 percent mortgages earlier this year.
The bank said housing market activity has slowed in most regions of the country and mortgage growth is showing tentative signs of slowing.
But commercial lending, which has been slow to recover from the financial crisis, should pick up, Frank Techar, BMO's head of Canadian personal and commercial banking, said on a conference call.
"The March and April year-over-year loan growth rates were stronger than January and February so we're starting to see momentum build in the commercial loan book," he said.
BMO's Canadian banking unit rang up a 7.8 percent increase in profit to C$446 million as lower margins were offset by higher loan volumes. Weak trading and investment banking revenue sent profit at BMO Capital Markets down by 1.7 percent to C$225 million.
Profit at BMO's Private Client Group, its wealth management unit, rose 59 percent to C$145 million, helped by acquisitions and higher fee-based revenue.
Provisions for credit losses fell by 34 percent to C$195 million.
BMO left its dividend steady at 70 Canadian cents a share. It is the only Canadian bank not to have raised its payout since the 2008 financial crisis.