Edward H. Gomez, Chief Financial Officer, said: "We are proud to announce these robust results that sustain the financial momentum achieved in recent years. The quarter's net income of $32.5 million is a record for the Bank and represents a 51% increase over the same quarter last year. This strong performance, driven by continued growth in core earnings, produced a return on equity of 21.3%, markedly higher than the 17.4% of a year ago. Fee-based revenue growth was led by a 38% increase in Investment Services fees, which continued to benefit from strong performance by our All Points Multi-Manager investment vehicle. Net interest earnings were also significantly higher as a result of volume growth combined with improved margins."
Mr. Gomez added: "We also continue to maintain our close guard on operating costs. The 21% increase over prior year revenue was achieved with a 14% increase in operating costs. The result was a further improvement in Bank of Bermuda's efficiency ratio to 70.9%, also a record."
Henry B. Smith, President and Chief Executive Officer, commented: "We are obviously delighted to follow last year's excellent performance by reporting first quarter results of this magnitude. We are also pleased that they show our continued success in growing our Private Clients business, which furthers a key strategic goal of achieving more balanced income streams. We believe that all of our businesses are well positioned for future growth and that ongoing investing trends will continue to drive demand for our services."
Financial Results in Detail
First Quarter 2000/2001 Compared to First Quarter 1999/2000
Total revenue increased 20.8% to $114.3 million, from $94.6 million in the first quarter of last year. The growth was generated by a 37.5% improvement in net interest income combined with healthy increases in non-interest income, up 7.7%.
Non-interest income for the quarter of $59.4 million compared with $55.2 million a year earlier. Over 70% of the year-on-year growth was generated by Investment Services, where fees were up 38% due to the continued success of new investment products. Global Fund Services fees were up 4% with strong performance in North America. In Europe, the loss of a very significant Global Fund Services client in the prior year is reducing the benefit of new client wins. In the Far East the focus has been on preparing to service the new Mandatory Provident Fund business, which becomes effective at the start of the 2001 calendar year.
Private Trust fees were 12% higher than the same quarter last year with growth in North America and the Far East. Foreign Exchange activity was little changed and earnings were down 1%. Banking Services fees were 7.8% lower than a year earlier, with a $0.5 million decline largely in Bermuda.
Net interest income grew $14 million, or 37.5%, due to improved liability pricing, a more productive asset mix and increased levels of non-interest bearing liability balances. Amounts provided for bad debts declined to $0.5 million for the quarter from $1 million for the same quarter last year.
Investment and other income of $2.5 million was up from $2.1 million a year ago. Strong performance by our trading portfolio, together with realised gains of $4.3 million on our mutual fund and equity investments, was partly offset by a $4 million provision for an e-commerce related potential loss.
Our 20.8% growth in total revenue was achieved with a 13.9% increase in operating costs. Salaries and staff related costs were the primary driver of higher costs, mostly due to an increased headcount in the Far East, in preparation for work generated by the new Mandatory Provident Fund business. Annual salary rises in the quarter also impacted the trend. Corporate, marketing and other expenses were $4.2 million higher than a year ago due to some significant consulting and other costs in the quarter.
Net income from operations was $31 million, $9.5 million, or 43.9% higher than a year earlier, and a record quarterly result. We also recorded a gain of $1.5 million during the quarter due to a change in accounting requirements that has been treated as an extraordinary item. Net income including this one-time credit was $32.5 million.
Balance Sheet
Total balance sheet assets at 30 September 2000 were $11.5 billion compared with $9.9 billion a year earlier. Our balance sheet assets are derived from the reinvestment of customer deposits, which were impacted by some significant short-term balances from mutual fund clients over the reporting date.
We have been steadily increasing investments in marketable securities over the past year. Marketable securities at September 2000 were $4.5 billion, compared with $3.5 billion a year ago. Cash and deposits with banks of $5.2 billion were $0.6 billion higher than last year as the reinvestment of short-term deposit liabilities at September 30, 2000 more than offset the effect of redirecting deposit assets into marketable securities over the past year. Loans, less allowance for loan losses, of $1.6 billion were little changed from $1.5 billion last year.
Total shareholders' equity increased $109 million to $618 million at the reporting date, primarily reflecting the retention of earnings and the exercise of the Bank's Millennium warrants during the past year.
- Ends -
Notes to Editors
The Bank's results are stated in accordance with generally accepted accounting principles in the United States.
Forward Looking Statements
This media release may be deemed to include forward looking statements, such as statements that refer to business plans, financial goals, business prospects and similar matters, that indicate our beliefs and expectations for future performance. Such forward looking statements involve certain risks and uncertainties including worldwide economic conditions, success in business retention and obtaining new business and other factors. These, and other, risks and uncertainties could cause actual results to differ materially from those indicated by forward-looking statements. Bank of Bermuda's 2000 Annual Report includes additional information about factors that could affect actual results in the section entitled "Forward Looking Statements".
Bank of Bermuda
Bank of Bermuda is an international financial institution that provides banking, trust, asset management, fund administration and global custody services to its corporate, private and retail clients. Founded in 1889, its global headquarters are in Bermuda, and it has offices or subsidiaries in the Cayman Islands, Cook Islands, Dublin, Guernsey, Hong Kong, Isle of Man, Jersey, Luxembourg, New York, New Zealand, and Singapore. It has representative offices in Bahrain and London.
The Bank is a publicly-traded corporation, listed on the Bermuda Stock Exchange.