UPDATE 1-Bank of Montreal posts lower quarterly profit as capital markets slump

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Dec 1 (Reuters) - Canada's Bank of Montreal posted a lower fourth-quarter profit on Thursday, as revenue from its capital markets business tumbled and the lender increased provisions for credit losses to brace for potential defaults in the face of a tepid economy.

Net income, excluding one-off items, fell to C$2.14 billion ($1.59 billion), or C$3.04 a share, in the three-month period ended Oct. 31, from C$2.23 billion, or C$3.33 a share, last year.

Analysts had estimated the company to report a profit of C$3.07 per share, according to data from Refinitiv IBES.

The Canadian lender had set aside provisions of $226 million in the reported quarter, compared with a release of $126 million last year.

Still, BMO recorded a 30% surge in profit from its U.S. personal and commercial business. Peers Royal Bank of Canada and National Bank of Canada posted a 5% and 13% jump, respectively, in their personal and commercial businesses on Wednesday.

Last month, BMO had also booked a charge of C$1.12 billion after a U.S. jury found its local unit liable for more than $550 million in damages in relation to a Ponzi scheme operated by a Minnesota businessman. ($1 = 1.3428 Canadian dollars) (Reporting by Mehnaz Yasmin in Bengaluru; Editing by Sherry Jacob-Phillips)