The Bank of Montreal said its fourth-quarter profit fell 35 per cent from last year as the bank took a hit from the global credit crunch.

BMO made $452 million, or 87 cents a share, down from $698 million, or $1.35 a share, in the same quarter of last year.

BMO 3-month TSX chart

The bank took $275 million in after-tax charges in the most recent quarter to cover deterioration in capital markets, losses in its commodities business, an increase in the general allowance for bad loans and a restructuring charge.

Excluding those charges, the bank said it made $727 million, or $1.42 a share, which was better than industry watchers had been expecting.

Analysts polled by Thomson Financial had a consensus profit outlook for BMO of $1.35 a share, excluding charges and gains.

Investors responded by sending up BMO shares by $2.55 on the TSX to a close of $57.95. But all bank stocks had a good day Tuesday as an Abu Dhabi group's $7.5 billion US purchase of a stake in American financial giant Citigroup led to a broad rebound in the financial sector.

BMO is the first major Canadian bank to report its fourth-quarter financial results. In the weeks leading up to the release of their results, many of the big banks disclosed the hits they will take from their exposure to the slumping U.S. mortgage market and the global credit crunch.

During the fourth quarter, BMO recorded $318 million in pre-tax charges for some trading activities and valuation writedowns.

The charges included $169 million for trading and structured-credit related positions and preferred shares, $134 million related to Canadian asset-backed commercial paper, and $15 million related to capital notes in two structured investment vehicles.

After the fourth-quarter charges, the bank said it could see more losses, or possibly even gains, on the investments in the future.

"Given the amount of our investments in [asset-backed commercial paper]and the [structured investment vehicles], and given the uncertainty in the capital markets environment, these investments could experience subsequent valuation gains and losses due to changes in market value," the bank said.

BMO is also holding its quarterly dividend steady at 70 cents per share for the first quarter of 2008.