BANK OF MONTREAL $69 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 500.0 million; Market cap: $34.5 billion; SI Rating: Above average) is the fourth-largest bank in Canada, with $356.5 billion in assets.

The bank has roughly 1,200 branches in Canada, and aims to add at least 15 branches in fiscal 2007 as part of a new restructuring plan. That should help it regain some of the business it lost to other banks in the past few years. It’s also reducing some of its back office staff. The restructuring should eventually cut its annual expenses by $300 million a year.

However, problems at its commodities trading operations led to a $327 million loss on some natural gas futures contracts. Bank of Montreal is currently working to cut the risk of its trading portfolio, so further charges are possible.

In the second quarter of fiscal 2007, Bank of Montreal earned $1.29 a share (total $671 million), up 3.2% from $1.25 a share ($651 million) a year earlier. If you exclude restructuring charges and losses from commodity trading, per-share earnings grew 17.6%, to $1.47 from $1.25. Revenue rose 2.4%, to $2.53 billion from $2.47 billion.

Bank of Montreal’s main asset outside of Canada is Harris Bank, which operates roughly 200 branches in the Chicago area. This business accounts for 10% of the bank’s total revenue.

Harris Bank’s earnings have come under pressure lately, as strong competition has forced it to cut lending rates to attract new borrowers. But a recent acquisition should improve its profitability. Uncertainty regarding a takeover of one of Harris’s main competitors could give it an opportunity to gain new corporate customers.

Bank of Montreal’s bad loans fell to 0.34% of total loans in the latest quarter from 0.41% a year earlier. However, the bank’s plan to expand its retail operations increased its costs and pushed up its efficiency ratio to 63.8% from 63.1%.

The stock has held up nicely in light of its trading losses, and now trades at 13.3 times the $5.18 a share it should earn in fiscal 2007. The $2.72 dividend yields 3.9%.

Bank of Montreal is a buy.