UPDATE 5-Bank of Montreal tops estimates; to cut 1,100 jobs

* Q2 EPS C$0.61 vs C$1.25

* Adjusted EPS slightly ahead of expectations

* Says to cut 3 pct of workforce

* Shares jump 4.6 pct, sector up on investor relief (Adds CEO comment from conference call, edits)

By Andrea Hopkins

TORONTO, May 26 (Reuters) - Bank of Montreal (BMO.TO) posted a stronger than expected quarterly profit on Tuesday, and said it was cutting 1,100 jobs, sending Canadian bank shares higher as investors bet that other big lenders reporting this week will also notch profits.

Canada's fourth-largest bank said it was cutting its 37,000-strong workforce by 3 percent across all operating groups in a move it said would save money down the road.

"The changes are expected to reduce ongoing costs and position our businesses to grow revenue and improve profitability with no reduction in our customer service," Chief Executive Bill Downe said in a statement.

Provisions for bad loans at BMO were not as high as some analysts had expected, illustrating how the nation's banking sector remains far healthier than that of its global peers.

"I think it was almost a collective sigh of relief from the marketplace today," said Edward Jones analyst Craig Fehr. "No outsized losses, no huge surprises ... I think the implication is the banks can continue to perform fairly well within their core banking operations."

Bank of Montreal shares rose 4.6 percent to C$43.47 on the Toronto Stock Exchange, while the broader financial index powered 4.1 percent higher, as BMO kicked off earnings season for the nation's Big Six banks.

The bank reported its profit fell 44 percent to C$358 million ($317 million), or 61 Canadian cents a share, in the second quarter, ended April 30. That was down from C$642 million, or C$1.25 a share, a year earlier.

The big drop in profit was shrugged off in part because the results included one-time charges of C$80 million for losses in BMO's backup financing operations and C$80 million in severance costs for the job cuts, which BMO said will be made at both the head office and corporate support levels.

Excluding those items, its adjusted cash earnings of 93 Canadian cents per share came in just above expectations.

The bank set aside a big chunk of money to cover bad loans, considered the biggest headwind for the recession-weary sector, but the provisions for credit losses were not as high as some analysts had forecast.

Downe himself said the biggest question for all of the banks is how credit will stand up as economic pain drags on.