* Wealth management drives profit
* Headline result tops estimates
* Bank raises dividend by 2.7 percent
* Shares drop 3.7 percent on U.S. weakness
* Canada's No. 4 bank is first to report quarterly results (Adds analyst comments, stock prices, details)
TORONTO, Dec 3 (Reuters) - Quarterly earnings at Bank of Montreal rose 1 percent due to stronger wealth management profit, and Canada's No. 4 bank raised its dividend, but its shares fell on Tuesday on the back of a sluggish performance at its U.S. Harris Bank unit.
Shares of BMO, the first Canadian bank to report fiscal fourth-quarter results, were down 3.7 percent at mid-morning, making BMO the weakest performer among financial stocks on the Toronto Stock Exchange's benchmark index.
Excluding items such as C$37 million ($34.73 million) in integration costs from the 2011 purchase of Wisconsin lender Marshall & Illsley, adjusted profit was C$1.1 billion, or C$1.64 a share.
That result topped analysts' estimates of a profit of C$1.58 a share, but analysts said the beat was helped by an accounting-related securities gain on the wealth management side.
"You could say it pretty much met on a headline basis, (but) if you peel through the operating numbers they don't look as good," said Peter Routledge, an analyst at National Bank Financial.
Earnings at BMO Harris Bank fell 28 percent to $102 million, which its parent attributed to weaker revenue and higher-than-normal commercial loan-loss provisions.
"The personal and commercial business in the U.S. has been stretched and strained since rates have jumped up," said Routledge. He said that weakness could weigh on Toronto-Dominion Bank's results, due on Thursday, as TD has a larger U.S. retail bank division than BMO.
Wealth management profit nearly doubled to C$312 million from C$164 million, helped by the C$121 million securities gain. Analysts said the division's results were strong even excluding the gain as assets under management rose by 14 percent.
BMO and its Canadian rivals have pushed aggressively into wealth management over the past few years because of the appeal of its relatively low-risk fee-based revenue.
"All the banks are putting all this focus on wealth management and that I think was kind of a stellar area for them," said John Kinsey, a portfolio manager at Caldwell Securities in Toronto.
NET PROFIT FLAT, DIVIDEND HIGHER
On a net basis, profit rose to $1.09 billion, or C$1.62 a share, in the fourth quarter, ended Oct. 31, from C$1.08 billion, or C$1.59 a share, a year earlier.
The bank raised its quarterly dividend by 2.7 percent to 76 Canadian cents a share, as expected, and also renewed a normal course issuer bid that will allow it to buy back up to 2.3 percent of its public float over the next year.
The bank's shares were down C$2.73 at C$70.80, although that follows a 16 percent year-to-date gain during which they hit a record high last week. Canadian bank shares have rallied since mid-year on expectations that interest rates will stay low for the foreseeable future.
Profit at BMO Capital Markets, the bank's brokerage unit, dropped 27 percent to C$229 million. Securities gains and stock underwriting fees fell, and trading revenue declined from a strong year-earlier quarter.
BMO's flagship Canadian retail bank earned C$469 million, up 6 percent, as loan growth more than made up for narrowing interest margins. Retail banking has been a strength for Canadian lenders in spite of concerns that a slowing housing market and low interest rates would pinch profit.
While Canadian housing activity has softened in some areas, it has yet to show signs of a hard landing.
In addition to TD, Royal Bank of Canada and Canadian Imperial Bank of Commerce report on Thursday, while Bank of Nova Scotia will release results on Friday.
($1=$1.065 Canadian) (Reporting by Cameron French; Editing by Jeffrey Benkoe, Lisa Von Ahn, Jeffrey Hodgson and Peter Galloway)