Hamilton, Bermuda, 27th July,1998 - The Bank of Bermuda today announced a sixth consecutive year record earnings. Net income of $61.2 million for the year ended 30th June, 1998 was an increase of $12.5 million or 26% over the previous year. Also announced was a 12.5% increase in the Bank's quarterly dividend, from 24 cents to 27 cents, and as special dividend of 10 cents per share to shareholders of record on 30th September, 1998.
Chief Financial Officer Edward H. Gomez had the following comments: "We are obviously pleased with these results. Basic earnings per share grew from last year's $2.43 to $3.04. This is by far the largest annual increase in the Bank's 109- year history and reflects broad-based growth in our international business. Fee income comprised over 65% of total revenues, led by strong gains in corporate trust, investment services and foreign exchange. Higher interest earnings reflected volume growth as well as improved margins on treasury assets and liability deposits."
With respect to the increase in the dividend and declaration of a special dividend, Mr. Gomez added: "Management and the Board of Directors were unanimous in their view that shareholders should benefit directly from the increased level of earnings, notwithstanding the probability that the Bank may seek to raise additional capital in the future for its strategic initiatives."
President and CEO, Henry B. Smith noted that the Bank's restructured management team is now firmly in place and determined to continue to grow the bank. "We have invested a great deal of time in setting our strategies for the coming years, we have introduced incentive programs to tie management compensation to shareholder interests, and we have set aggressive targets to improve the Bank's performance," said Mr. Smith. He went on to say that the Bank has also initiated new performance measurements that facilitate closer tracking of each of the Bank's businesses. "Our reporting now focuses on global business rather than on regional results. This approach stresses the importance of individual lines of business while retaining our essential emphasis on team effort. Our results continue to be a reflection of the hard work and creativity of our people. Without their enthusiasm and dedication these achievements would not be possible," concluded Mr. Smith.
Financial Results
The bank's net income of $61.2 million compares with $48.7 million in the previous year. Core recurring revenues increased 23% to $304.2 million. Operating income climbed from $56.1 million to $69.4 million.
Fee revenues increased by $23.2 million from the prior year. The Bank recorded growth in all major fee categories and in all geographic regions. Corporate trust fee revenues from global custody, accounting and valuations, and administrative services increased $6.1 million worldwide. Foreign exchange earnings climbed $8.8 million. This was largely driven by the volatility of markets in Asia as well as increased business volumes. Fee revenues from investment services also improved, rising $6.4 million from the prior year.
Interest income was $100.1 million compared with $67.2 million last year. Interest earnings were up in all geographical regions. In Europe, Asia and North America this reflected higher volumes and improved margins. The improvement in Asia was due principally to the impact of market volatility in the region. In addition to rebounding from the portfolio repositioning costs in the prior year, Bermuda's interest earnings also rose as a result of improved margins. The efforts of the Bank's asset and liability management group are showing excellent results, in particular on liability product margins.
Operating expenses were $241.5 million. Constant with plan, this was $29.8 million above the previous year and resulted from additional investments in staff to support growth in the Bank's international business. The efficiency ratio improved by about 1.5 percentage points, and the number of initiatives are underway to promote further efficiency gains. These include operations divisions in both Bermuda and Europe, the establishment of a joint venture in Bermuda with the Bank of Butterfield, and location of additional servicing capability in New York. The Bank also is establishing a new systems center in Stirling, Scotland to draw on the pool of information technology expertise in the area, as well as provide greater efficiency for its existing 24 hour global IT delivery service.
The Bank's return on equity increased from last year's 12.9% to 14.6%. the risk weighted capital ratio was 13.9% at year end, well above the 10% Bermuda requirement and the 8% international standard. Total assets at 30th June were $10.1 billion, an increase of $192 million. Customer deposits were up by $124 million to $9.5 billion. The Bank's capital base grew by $44 million in the year to $442 million at 30th June, 1998.