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The Bank of Montreal Financial Group building in downtown Toronto is shown on Tuesday, January 28, 2014.

Nathan Denette/THE CANADIAN PRESS

The capital-markets arm of Bank of Montreal reported a 12-per-cent jump in earnings in its second quarter, buoyed by record revenue in underwriting and advisory work that helped the bank overcome lacklustre results in trading.

Net income for BMO Nesbitt Burns Inc. increased to $321-million during the three months ended April 30, from $287-million during the same period in 2016, the bank said on Wednesday in a statement. Revenue rose 13 per cent to $1.2-billion.

The bank says these results were driven by a robust quarter for its investment and corporate banking in both Canada and the United States. Revenue surged in this part of its business to $515-million, with the fees generated from underwriting and advisory rising 75 per cent to $311-million, a quarterly record for BMO.

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Read more: BMO kicks off bank results with profit boost, dividend hike

During a conference call with analysts, Bill Downe, BMO's chief executive officer, attributed the segment's performance to "diverse sources of revenue, good expense management and continued operating leverage."

BMO also said these gains were partially offset by lower revenue from trading, higher non-interest expenses and higher taxes. It set aside $46-million for credit losses, which caught analysts' attention.

Revenue from trading products, which includes equities, interest rates and foreign exchange, decreased in the second quarter to $685-million, from $728-million a year earlier. During the first quarter, the bank recorded $779-million in trading-products sales.

"The trading results we characterize as being good, but down from particularly strong results in the last few quarters, and a good quarter a year ago," Tom Flynn, BMO's chief financial officer, said in an interview. "So it's not so much that the results were soft but that the comparative periods were particularly strong."

John Aiken, an analyst at Barclays Capital Canada Inc., predicted in a note to clients that "the weaker trading performance will also resonate" across the sector in Canada – and could weigh on Royal Bank of Canada and National Bank of Canada the most. He also expects the other banks will see a bump in investment-banking revenue as BMO did.

With a file from James Bradshaw

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