05/25/2011 01:57 EDT | Updated 11/16/2011 06:04 EST

Bank Of Montreal Q2 Profit Rises To $800 Million

TORONTO (CP) - Bank of Montreal (TSX:BMO) has turned out a stronger second-quarter profit of $800 million, up about seven per cent from a year earlier on the back of lower domestic loan losses.

The results from the bank, the first of the big Canadian financial institutions to report its earnings for the quarter, surpassed analyst expectations, but growth was muted in most divisions and included a decrease in profits in a number of areas.

BMO said its earnings were equivalent to $1.34 per share, above the $745 million or $1.26 per share in profit it reported a year ago.

Adjusted earnings were $1.35 per share, four cents ahead of analyst expectations collected by Thomson Reuters.

Provisions for credit losses were $145 million, a decrease of $104 million, as a lower number of its clients missed loan payments.

"We continue to see the benefit from investments in customer experience contributing to top-line growth and customer loyalty," said president and CEO Bill Downe.

"As we see the signs of a business-led recovery in both Canada and the United States, we believe that banks like ours have a unique institutional responsibility to play in that recovery."

Quarterly revenue increased to $3.21 billion, below expectations of $3.25 billion but ahead of the $3.04 billion reported a year earlier.

In its Canadian personal and commercial banking division, BMO reported a profit increase of 1.7 per cent to $401 million from $394 million.

The U.S. division posted US$43 million in profit, down 2.8 per cent from $45 million on higher loan losses.

"Our consistent approach to lending, in good times and more challenging times, continues to pay off with ongoing strength in (Canadian personal and commercial loans) balances and market share, while maintaining our disciplined approach to risk management," Downe added.

Insurance profits slipped to $1 million from $43 million, affected by an after-tax charge of $47 million on higher claims from its reinsurance business due to the earthquakes in New Zealand and Japan.

The bank kept its quarterly dividend steady at 70 cents per share.

In its capital markets division, profits slipped 9.4 per cent to $235 million, affected by lower trading revenues. BMO noted that the division is experiencing higher merger and acquisition as well as debt underwriting activity this year.

Barclays Capital analyst John Aiken said he considered the quarterly results "solid," with high-quality earnings overall.

"Improving credit quality within Canada was much stronger than we had anticipated and led to the significantly lower provisions than we had forecast," he wrote in a note.

Aiken also said "BMO did show improvements in its U.S. credit, which could bode well for TD Bank and Royal Bank, and potentially Scotiabank, each of which have sizable credit portfolios south of the border."

Bank of Montreal has more than 38,000 employees across its North American operations, which include retail banking, wealth management and investment banking, as well as its Chicago-based Harris Bank subsidiary.

Harris Bank has more than 300 branches in Illinois, Indiana and Wisconsin as well as locations in Arizona, California, Florida, Georgia, New York, New Jersey, Texas, Virginia and Washington.

Shares of BMO were up 38 cents at $61.88 in midday trading Wednesday on the Toronto Stock Exchange.