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Pedestrians heading east across Bay St. at King St. West on April 17 2014. The Bank of Montreal is on the opposite corner.Fred Lum/The Globe and Mail

Bank of Montreal extended a streak of Big Six earnings that has mostly defied expectations, but the lender's strong run in Canadian banking showed signs of cooling.

Within Canada, BMO's personal and commercial lending growth has often outpaced that of its peers, and the bank reported total domestic loan growth of 9 per cent year over year, the highest of the lenders who have already reported second quarter earnings. But comparisons to rival lenders aren't as flattering over a shorter time period. Most banks, including BMO, reported Canadian loan growth of 1 or 1.5 per cent over the first quarter.

BMO's strength in Canadian lending over the past few years is no coincidence. Historically, the bank was known for its commercial lending, but chief executive officer Bill Downe has pushed hard to expand its retail banking presence. Notably, BMO has been aggressive on mortgage pricing, offering low rates during spring when home buying is typically hottest.

On a conference call with analysts Wednesday, BMO's management team acknowledged that it has been hard to outperform in the lending market so far in fiscal 2014 because there has not been as much activity. However, mortgages are showing signs of heating up and the bank believes it is on a good footing heading into the summer.

"It's not unreasonable for us to believe that we should be able to continue to enhance [market share]," Mr. Downe said in an interview.

While BMO has benefited from starting with a small personal portfolio, making it easier to generate bigger growth, Mr. Downe said the bank continues to be competitive on pricing and the retail banking management team is more sophisticated than it once was because it has learned so much over the past four years.

BMO earned $1.1-billion or $1.60 a share in the second quarter, up 12 per cent over what was a soft second quarter of 2013. The bank raised its quarterly dividend by 2 cents, to 78 cents.

Aside from solid Canadian banking earnings, hot equity markets propped up wealth management and BMO's capital markets arm also reported a strong profit, its highest in a year and a half, and up 17 per cent from the previous year. Better trading results boosted profits, with equity trading almost doubling its revenue to $196-million from the year prior.

However, U.S. banking results continue to weigh on the bottom line. BMO's U.S. personal and commercial banking division continues to face a tough operating environment. The arm's core earnings fell 6 per cent year over year and 8 per cent from the previous quarter. Like many of its U.S. rivals, BMO is suffering from lower loan margins and weaker mortgage revenue, but the bank's overall loan volumes climbed 7 per cent higher from the previous year.

Since buying Midwest-based Marshall and Ilsley for $4.1-billion in 2010, BMO has yet to generate a string of strong U.S. personal and commercial banking profits.

Much of this stems from weak fundamentals, as the region's economy has been slow to recover from the financial crisis, making it harder to beef up the bottom line. Mr. Downe recently described 2014 as the likely "inflection year" for the division. Halfway through fiscal 2014, however, earnings are down 11 per cent from the first six months of 2013.

Starting next quarter, BMO's wealth management earnings are likely to see a jump, following the bank's acquisition of London's F&C Asset Management for $1.3-billion.

Like many Canadian banks, wealth management has become a hot sector, largely because its revenues are fee-based so it requires little capital, and investor confidence in the markets is growing again.

BMO is also intent on expanding its credit card portfolio – an area in which the bank has historically underperformed.

"To be sure, it's an area we haven't done as well in in past years," Cam Fowler, Canadian personal and commercial banking head, said on a conference call.

But the progress is encouraging, with BMO adding more premium cards to its portfolio during the first half of fiscal 2014 than it did in all of last year. "We're starting to see some pretty pleasing results," he said.

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