"The U.S. consumer has deleveraged," said Mark Furlong, who heads BMO's U.S. personal and commercial banking division, during a conference call Tuesday.
"You can see a consumer that is beginning to have a little more capacity to grow."
However, the low interest rate environment will continue to pressure BMO's U.S. operations throughout all of next year, partly due to how the bank is positioned there.
Meanwhile, margin pressures on its Canadian banking segments will ease going into fiscal 2014, BMO said.
The bank (TSX:BMO) reported third-quarter results that beat analyst expectations Tuesday as its Canadian retail banking operations improved.
But analysts said the results may not be as impressive as they seemed because the gains relied too heavily on non-recurring items such as recoveries on bad loans.
BMO had a $140-million gain during the quarter from selling off impaired loans it had inherited during its acquisition of Wisconsin-based Marshall & Ilsley several years ago.
CIBC World Markets analyst Robert Sedran said it's a good thing that the bank is selling off the impaired loans for more than they had originally been marked at, but noted that the loan recoveries are limited.
"They will run out at some point, so we hesitate to rely on such a big number," Sedran said.
BMO said Tuesday it earned $1.14 billion or $1.68 cents per share for the quarter ended July 31, up from $970 million or $1.42 per share in the same year-earlier period.
Revenue rose to $4.05 billion from $3.88 billion.
Adjusted net income was $1.14 billion, also $1.68 cents per share, versus $1.01 billion or $1.49 cents per share a year ago.
Analysts surveyed by Thomson Reuters were expecting $1.52 in adjusted earnings per share and revenue of $3.96 billion.
Barclays analyst John Aiken noted that many were expecting a boost in the dividend and may be disappointed that the bank has left it unchanged.
"BMO has had a strong run recently and we would not be surprised if the results were not strong enough to retain all of the ground gained," Aiken said in a note.
BMO's Canadian personal and commercial banking segment earned $497 million, up from $459 million a year ago.
In the U.S., the bank's personal and commercial banking business earned $153 million. That was up from $139 million a year ago but down compared with the second quarter of this year, when the division raked in $155 million.
Provisions for credit losses fell to $77 million from $237 million a year ago, with adjusted provisions for credit losses declining to $13 million from $116 million.
BMO has been focusing on cost controls to help weather the recent wave of sluggish consumer lending and president and CEO Bill Downe said the third-quarter results "reflect the benefits of our disciplined growth strategy."
"We believe the North American economic environment will provide good opportunities for growth in each of our businesses," Downe told analysts.
"The Canadian economy continues to grow modestly, although exports are expected to pick up as U.S. demand improves while business investment should strengthen."
The bank has more than 46,000 employees across its North American operations, which include retail banking, wealth management and investment banking, as well as the Chicago-based Harris Bank subsidiary.