The Bank of Montreal saw its first-quarter profit climb seven per cent to $1.07 billion, even as lagging energy prices took a bigger bite out of its loan books to the oil and gas sector.

"We expected an increase in impaired loans in the oil and gas franchise in particular and we saw that, but it certainly wasn't a disaster," Edward Jones analyst Jim Shanahan said after BMO issued the results Tuesday.

Analysts have been predicting that the dramatic decline in the price of crude would lead to higher loan losses for the banks, as both energy companies and consumers in oil-dependent provinces begin to default on their debts.

But any credit issues that have surfaced in the lenders' loan books during recent quarters have been mild and manageable, and if BMO's results are any indication, that trend could continue as other banks report their first-quarter results in the days ahead.

BMO 1st bank to report Q1 earnings

BMO kicked off the earnings parade on Tuesday, and will be followed by Royal Bank on Wednesday and CIBC and TD on Thursday. Scotiabank will wrap up the earnings season for the big banks next week.

On the consumer side, Shanahan said, Canadian borrowers have proven to be more resilient than many analysts had predicted.

"Despite what appears to be a very difficult environment, particularly in Alberta, Saskatchewan, Manitoba — where unemployment rates are near 10- or 20-year highs — Canadians are continuing to pay their bills," Shanahan said. "That says a lot about Canadian households."

On the corporate side, BMO's loans to oil and gas companies that are unlikely to be repaid in full rose to $162 million during the quarter — an increase of nearly 60 per cent from the previous quarter.

Loan portfolio 'not showing any cracks'

Despite the uptick, Barclays analyst John Aiken said impaired loans to the energy sector are modest, representing only 2.2 per cent of the bank's oil and gas loans.

"While weakness continues to permeate through BMO's energy portfolio, it is still not showing any cracks," Aiken said in a note to clients.

During a conference call to discuss the bank's earnings, BMO's chief executive expressed optimism about the bank's ability to perform well in spite of challenges that include depressed oil prices, volatile stock markets and sluggish economic growth.

"In this environment, the opportunity for the bank to grow is grounded in our ability to execute on our clear and consistent set of priorities, which recognize the potential for technology to transform the business of banking," said Bill Downe