For the full 2000 fiscal year, diluted earnings per share were $4.47, up from $3.22 last year. Net income was $106.1 million, up 44% from $73.6 million a year ago. Return on shareholders equity for the year was 19.4%.
Edward H. Gomez, Chief Financial Officer, said: "This marks our eighth consecutive year of record earnings and the first time in Bank of Bermuda's history that net income has surpassed $100 million. This year's performance also sets new records for return on equity and operating efficiency. The 44% annual increase in earnings, which follows last year's 25% increase, was driven by the increasingly effective delivery of our client-focused products across a well placed international franchise. The gains reflect solid growth in all lines of business and in all of our geographical regions, coupled with ongoing improvements in balance sheet management and control of operating costs. Of particular note is the continued growth of our private clients business, which brings added strength and balance to Bank of Bermuda's fee-based revenues."
Mr. Gomez added: "We are pleased that these excellent results enable us to announce special Year 2000 dividend actions. The Board of Directors has declared a one-for-seven stock dividend, together with an incremental cash dividend of 60 cents per share, which is in addition to the regular quarterly dividend of 27 cents per share, to shareholders of record on August 18, 2000. These actions demonstrate the Board's continued commitment to shareholder return as we work towards achieving a more liquid market for our shares."
Henry B. Smith, President and Chief Executive Officer, commented: "We are obviously delighted with these results. Our strong performance highlights an enduring demand for our relationship-based approach, as well as our success in creating the global products and services our clients require. In both these respects, the Bank's performance is due to the commitment and creativity of our talented staff, whom I would like to thank for their superb performance during the current year." He added: "We continue to view the future with great excitement and believe that we have an excellent base on which to build our future success. With a proven position as a globally competitive, financial solutions provider, we see tremendous opportunities to further leverage our particular network and skills in the coming years."
Financial Results
Fourth Quarter 2000/1999 Compared to Fourth Quarter 1998/99
Total revenue increased 15% to $108.2 million, from $94 million in the fourth quarter of last year. The growth was principally driven by higher net interest income, up 31%, while increases in recurring fee revenues of approximately 13% were reduced by some significant one-time charges totaling $3.2 million in the quarter.
Fee revenues for the quarter of $58.2 million compared with $54.1 million a year earlier. Core recurring growth in our most significant fee revenue line, global fund services, was up approximately 10% from the same quarter last year. This was partly offset by a $1.3 million write-off in the quarter of an accumulated balance on a significant client. This charge does not impair our projected ongoing growth-rate. Private trust fees were also impacted by a non-recurring charge of $1.9 million in the current quarter, resulting from a change in accounting policy. Excluding this item gives an underlying growth-rate for private trust fees of approximately 5% for the quarter.
Investment services fees generated a sizeable 31% increase from the same quarter last year, driven by superb performance of new, higher-margin, investment products. In addition, foreign exchange earnings showed 18% growth, largely generated through sustained focus on improving client-spread business. Banking services fees reported a healthy 14% rise.
Net interest income increased to $50.4 million, from $38.6 million a year ago, reflecting improved yields from careful deposit pricing and higher returns on the reinvestment of non-interest bearing deposit liabilities in a rising interest rate environment.
Investment and other income showed a net expense of $345 thousand (compared with $1.3 million income in the fourth quarter 1999).
Operating expenses in the fourth quarter 2000 of $78.6 million were 8% higher than last year with increases in systems and staff-related costs mitigated by decreases in corporate, marketing and other expenses.
Full Year 2000 Compared to Full Year 1999
Revenues increased 18% to $419 million, from $354 million last year, driven by broad-based fee revenue growth and continued strength in interest earnings.
Fee revenues totalled $235 million, up 19% from $198 million in fiscal 1999, with particularly strong growth in global fund services fees (up 19%) and investment services fees (up 39%). Global fund services revenue reached record levels towards the end of the fiscal year, supported by a sound recovery in the Far East client asset values that were the primary drivers of a downturn last year. Private trust revenues remained solid, reporting a 5% increase over the prior year. The success of new investment products was the key factor driving the 39% increase in investment services fees to $42.1 million, from $30.2 million a year earlier. Robust transaction volumes also assisted this strong growth, as trading volumes increased during periods of considerable market volatility in the current year. Banking services fees improved 16% year-on-year, as our Bermuda-based Retail Clients division maintained its strong performance trend.
Net interest income of $181.3 million was a record and a 26% increase from the prior year. The increase is primarily driven by improved yields as we aim to limit the size of our balance sheet for capital management purposes. The increased yield has been generated through continued focus on improving the returns on both sides of our balance sheet through active deposit pricing and careful improvements in our asset-mix.
Operating expenses totalled $304.8 million, up 11% from last year. The majority of the year-on-year increase was fuelled by higher salaries and related costs resulting from annual pay rises at the start of the fiscal year, additional headcount to support business growth initiatives, and higher performance-related compensation. Systems costs were 9% higher in a fiscal year that saw considerable investment in Year 2000 preparation. Corporate, marketing and other expenses were 5% higher, while property expenses actually fell 4% as cost savings were achieved in Bermuda and the Far East.
Balance Sheet
Total balance sheet assets were $10.4 billion, compared to $9.6 billion last year and $10.7 billion at the end of the previous quarter. Our balance sheet assets are derived from the reinvestment of customer deposits, which grew in the current year as our clients increased their cash deposit balances in response to uncertain financial markets.
The composition of total assets has changed over the year as we reinvested our additional client deposit funds into higher yielding marketable securities rather than deposits with banks. Marketable securities grew to $4.0 billion, from $3.5 billion a year ago ($4.1 billion at 31 March 2000). Cash and deposits with banks of $4.4 billion were unchanged from 30 June 1999 and slightly lower than $4.7 billion at 31 March 2000. Loans, less allowance for loan losses, grew 10% from $1.4 billion last year to $1.6 billion at both 31 March and 30 June 2000.
Total shareholders' equity increased $120 million from last year to $604 million at the reporting date, reflecting the retention of earnings and the exercise of the Bank's Millennium warrants during the current year.