August 23, 2011 / 5:43 PM / 6 years ago

BMO wealth management earnings bolstered by US deal

* PCG Q3 profit C$120 mln vs C$105 mln a year earlier

* M&I deal nearly doubles BMO's U.S. wealth footprint

* Analyst says he expected better results for the unit

* Insurance income down 45 pct on lower long-term rates

TORONTO, Aug 23 (Reuters) - Bank of Montreal (BMO.TO) said on Tuesday that quarterly income at its Private Client Group rose 14 percent from a year earlier as new client assets and earnings from a recent U.S. acquisition helped offset weakness in brokerage volumes and a drop in insurance earnings.

Canada's No. 4 bank said its Private Client Group (PCG) earned C$120 million ($121 million) in BMO's third quarter, up from C$105 million a year earlier.

The PCG unit provides wealth management services and products to retail, high-net-worth, and select institutional clients. It operates in Canada, the United States, the United Kingdom, and China.

BMO said that its $4.1 billion acquisition of U.S. Midwest lender Marshall & Ilsley, which closed in the quarter, nearly doubled its U.S. wealth management footprint and added C$4 million to the unit's earnings.

U.S. PCG earnings were C$13 million, up from C$5 million in the year-before quarter.

Quarter-over-quarter, net income at the PCG segment was relatively unchanged as higher mutual fund and private banking revenue was mostly offset by lower revenue in BMO's brokerage business.

"I am little bit disappointed," said Brian Klock, an analyst at Keefe, Bruyette & Woods, adding that if earnings from the M&I acquisition were taken out, quarter-over-quarter income was lower.

He also noted that in the previous quarter BMO's insurance income was only C$1 million due to the earthquakes in New Zealand and Japan.

Insurance income in the third quarter, ended July 31, was C$19 million, down 45 percent from a year earlier, mainly due to the adverse effect of unfavorable long-term interest rate movements on policyholder liabilities, the bank said.

"There is a negative mark-to-market adjustment that was in there, but it should have been offset somewhat on the expense side," Klock said. "But expenses were up."

Expenses increased 14 percent to C$461 million, due in part to the impact of acquisitions.

Excluding insurance, earnings at the segment were up 43 percent from a year earlier.

Assets under management and administration rose around 70 percent to C$429 billion from a year earlier. Adjusted to exclude acquisitions and the weaker U.S. dollar, assets were up by 12 percent.

Revenue rose 13 percent from a year earlier to C$617 billion

BMO's exchange-traded fund business, launched in June 2009, had C$2.7 billion in assets under management and consisted of a product portfolio of 40 funds.

Overall, BMO said its quarterly profit rose by a higher-than-expected 18 percent as capital markets income surged and the M&I transaction started to contribute. [ID:nN1E77L0PK]

$1=$0.99 Canadian Reporting by John McCrank; editing by Peter Galloway

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