TORONTO (Reuters) - Bank of Montreal said on Tuesday that quarterly profit rose 16 percent as it set aside less money for bad loans.

Canada's fourth-largest bank reported net income of C$647 million ($610 million), or C$1.11 a share, for the fourth quarter ended October 31, up from C$560 million, or C$1.06 a share, a year earlier.

The amount the bank set aside to cover bad loans fell to C$386 million from C$465 million in a sign that credit woes may be easing as the recession recedes, at least in Canada.

The dividend was unchanged at 70 Canadian cents per common share, as expected.

BMO is the first of Canada's big six banks to report fourth-quarter earnings, with the others revealing results over the next three weeks.

($1=$1.06 Canadian)

(Reporting by Andrea Hopkins; Editing by Lisa Von Ahn)