* 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)
By Cameron French
TORONTO, Dec 3 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
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
"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
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.
(Reporting by Cameron French; Editing by Jeffrey Benkoe, Lisa
Von Ahn, Jeffrey Hodgson and Peter Galloway)