* Cash EPS C$1.32 vs estimates of C$1.31
* To issue C$400 mln in stock, down from C$800 mln
* Bank's shares ease 0.3 pct to C$61.77
(Adds details from conference call, updates shares)
By Cameron French
TORONTO, March 1 Bank of Montreal's (BMO.TO)
first-quarter profit rose 18 percent due to stronger loan
growth and investment banking fees, and the bank said it will
issue less stock than previously expected to pay for its
acquisition of Wisconsin bank Marshall & Ilsley Corp MI.N.
Cash earnings of C$1.32 were marginally above expectations
of C$1.31 a share, while the planned equity issuance of C$400
million was half the bank's original target to pay for the $4.1
billion acquisition announced late last year.
Profit was driven by increased lending at wider margins,
and stronger trading and underwriting fees at its investment
But BMO's shares fell slightly as the strong result ran up
against high expectations spurred by much better than expected
profits reported last week by rivals Canadian Imperial Bank of
Commerce (CM.TO) and National Bank of Canada (NA.TO).
"The stage was set with a pretty high bar last week," said
Craig Fehr, an analyst at Edward Jones in St. Louis, Missouri.
Shares of BMO ended the session down 0.3 percent at
C$61.77, trading roughly in line with their peers.
Fehr said BMO's loan growth, wholesale banking and wealth
management profits were all strong during the quarter.
"I'd say the one blemish was the fact that credit
performance didn't improve at the pace we'd expected it to, so
loan loss provisions were slightly above our estimates," he
BMO's provisions for bad loans -- which have been declining
steadily over the past year, helping drive profit growth for
Canadian banks -- fell 25.6 percent to C$248 million.
CONSUMERS STILL BORROWING
Analysts and bankers have predicted that retail loan growth
will slow this year as borrowers try to reduce debt levels in
anticipation of higher interest rates. But first-quarter bank
results so far suggest consumers are still willing to borrow.
"It's clear we are going to see some slowing, and we've
started to see that already. My expectation is we're not going
to go to zero," Frank Techar, head of BMO's Canadian personal
and commercial bank, told investors on a conference call.
"Growth levels are still fairly healthy."
On a net basis, BMO earned C$776 million ($800 million), or
C$1.30 a share, in its first quarter, up 18 percent from C$657
million, or C$1.12 a share, a year earlier.
Profit at BMO's U.S. Midwest bank slid 17 percent due to
BMO has operated Chicago-based Harris Bank for more than
two decades, and in December it agreed to buy troubled
Wisconsin lender Marshall & Ilsley.
At the time, BMO said it would issue about C$800 million in
stock to pay for the transaction. But extra clarity on looming
Basel III capital regulations allowed it to reduce that
estimate to C$400 million, it said on Tuesday.
Speaking on the call, BMO Chief Executive Bill Downe said
it was possible the size of the stock issue could fall
He also said cost savings from the combination of M&I and
BMO's existing U.S. operations could better BMO's original
estimate of C$250 million in annual savings by 2013.
"We expect to meet or exceed this number," he said.
(Reporting by Cameron French; editing by Peter Galloway)