Strong earnings performance by the Bank's International operations, notably Grand Cayman and Guernsey, and the Domestic Trust businesses were offset by a disappointing performance from the Banking operations. Whilst Total Income increased by a satisfying 8.9% to $72.8 million, with fee income up 9.1% to $35.9 million and net interest income up 8.6% to $36.8 million, total operating expenses increased 13.9% to $59.7 million. As a result, declines were seen both in the Bank's return assets, 0.63% from 0.69%, and return on equity, 9.15% against 10.9% for the corresponding period in 1995.
The banking operations in Bermuda are in a transitional stage and we still have to achieve the full benefits of our substantial previous periods' investments in technology and information systems. The Bank remains confident that these initiatives will result in greater cost efficiencies throughout our operations. Vigorous action has been taken by management to ensure that benefits are achieved in the short term. This, coupled with ongoing initiatives being taken to improve the delivery of products and services to our customers, thereby improving the quality of the Bank's income enables management to be confident that an improvement in earnings will be achieved in the second six months of the financial year.
The Bank's balance sheet remains sound with a continuing stable deposit base and high quality loan book. Loans outstanding at calendar year end 1996 were $1.28 billion, down from $1.49 billion at the end of 1995, reflecting Management's stated policy of phasing out marginally profitable corporate lending relationships. these assets have been replaced through increased investments in high quality assets predominantly issued be major financial institutions and OECD Government agencies, which afford the benefits of enhanced yield over that normally available in the wholesale inter-bank deposit markets and a high degree of liquidity.
Contact: Stephen W. Kempe
Executive Vice President, Group Business Development
The Bank of N.T. Butterfield & Son Ltd.
Date: 30 January, 1997