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The Bank of Montreal building in downtown Toronto.Nathan Denette/The Canadian Press

Bank of Montreal reported higher fourth-quarter profit and raised its dividend by 25 per cent as strong retail banking income and recoveries from loan loss reserves helped the bank beat analysts’ estimates.

Canada’s fourth-largest bank increased its quarterly dividend to $1.33 per share, from $1.06, and announced a plan to buy back up to 3.5 per cent of its shares – or 22.5 million shares in total. Those were the largest increases announced by any of the Big Six banks this quarter after the federal banking regulator recently lifted temporary restrictions on capital distribution.

For the quarter that ended Oct. 31, BMO earned $2.2-billion, or $3.23 per share, a 36-per-cent increase from $1.6-billion, or $2.37 per share, in the same quarter last year.

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Adjusted for certain items, BMO said it earned $3.33 per share, which was well above the consensus estimate of $3.21 among analysts, according to Refinitiv.

“Earnings were fine, if unspectacular,” said John Aiken, an analyst at Barclays Capital Inc., in a note to clients.

BMO joins Bank of Nova Scotia and Toronto-Dominion Bank as one of three major lenders that exceeded analysts’ expectations in the quarter. Royal Bank of Canada , Canadian Imperial Bank of Commerce and National Bank of Canada all fell short of predictions as shrinking profit margins on lending and weaker trading revenue weighed on earnings.

In the fourth quarter, BMO recovered $126-million in provisions for credit losses, reclaiming funds that had been set aside early in the pandemic in case of a surge in loan losses that never happened.

Profit of $921-million from Canadian personal and commercial banking was a bright spot, as revenue increased 13 per cent year over year. Rising loan balances were driven by brisk business in mortgages, while fee-based income was up 22 per cent.

Earnings from U.S. retail banking were up 58 per cent from a year ago to $512-million, though loan balances increased only 3 per cent in that span. In capital markets, profit was $536-million, as a 25-per-cent rise in revenue from investment and corporate banking more than offset a 9-per-cent dip in global markets revenue. And profit from wealth management was up 15 per cent to $369-million.

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