BMO Q1 profit up 18%

Bank of Montreal says its first-quarter profit rose 18 per cent to $776 million, beating expectations with a solid performance driven by gains in its capital markets and domestic banking divisions.

The bank said Tuesday its record first-quarter net income was equal to $1.32 cash earnings per share, a penny above average analyst expectations of $1.31, according to Thomson Reuters. In the same period a year earlier, the bank earned $657 million or $1.13 per share.

Revenue during the quarter increased 11 per cent to $3.3 billion, slightly above expectations of $3.2 billion.

Earnings from Canadian personal and commercial banking rose 10 per cent to $444 million. The division "continues to show good momentum, generating strong revenue growth in our personal and commercial businesses, driven by volume growth across most products and improved net interest margin," president and CEO Bill Downe said in a statement.

BMO's provisions for credit losses, or money put aside to cover bad loans, decreased to $248 million, $85 million below year-earlier levels.

"Credit was stable, with a slight decline in provisions for credit losses and overall gross impaired loans. However, it does not appear to be the tailwind to earnings that it has been for BMO over the past several quarters," Barclays analyst John Aiken wrote in a note to clients.

In the United States, personal and commercial banking profits were $42 million US, a decline of 13 per cent from $48 million a year earlier due to higher provisions for credit losses.

BMO Capital Markets, the bank's trading division, posted a 21 per cent increase in profits to $257 million, as revenues grew to $963 million, a jump of 14 per cent.

"BMO Capital Markets had strong growth in both net income and revenue with good performance in investment banking, where mergers and acquisitions revenue and debt underwriting fees were up appreciably from a year ago," Downe said.

BMO also said that it plans to keep its dividend steady at 70 cents per share for now.

Last month, Downe told a financial conference in New York that he is encouraged by signs that business spending in the United States is picking up, which gives him confidence the American economy is heading for a vibrant 2011.

The bank expanded its presence in the U.S. in December with the acquisition of Wisconsin-based Marshall & Ilsley Corp. for $4.1 billion US in shares, which doubled its U.S. operations, particularly focused in the Midwest.

As part of the latest round of results, BMO also announced that it will raise less than $400 million to finance the transaction, far less than that initial $800 million estimate it provide late last year.

Bank of Montreal has 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 in the bank gained 42 cents to $62.38 in early trading on the Toronto Stock Exchange.