TORONTO

BMO Financial Group launched the third-quarter earning season of the Canadian banking industry with disappointing results that included a 21 per cent decline in net income, hurt by losses from bad loans.

The bank said its net income was $521 million, or 98 cents per share on a diluted basis and compared with the bank's profit of $660 million or $1.28 a share a year earlier.

The results were worth $1 per share on a cash basis, below the $1.19 per share estimate that analysts were predict, according a Thomson Financial.

"These times are challenging and we can reasonably expect them to remain challenging for the near future,'' said president and chief executive Bill Downe in a conference call with analysts.

"The BMO Financial Group is managing effectively through this period and is ready to capture significant gains when more normal times resume.''

BMO said its provisions for credit losses in the quarter totalled $484 million.

That included a $50-million increase in the bank's general allowance for credit losses and $247 million for two corporate accounts related to the U.S. housing market.

Overall revenue increased by $191 million to $2.75 billion, up eight per cent compared with the third quarter of 2007.

Bank of Montreal also said profit at its main domestic banking business was down compared with the same time last year but still declared it a strong showing and one of the best on record.