Commenting on the December quarter results, Edward H. Gomez, Chief Financial Officer, said: "Our businesses finished the year at a record pace, with net income from continuing operations up more than 30% from the same quarter last year. Excluding the effect of one-time items, return on equity was 21.5% and efficiency 70.0%, both significantly better than a year ago. Despite difficult global financial markets, fee-based revenues were up 15% in the quarter, with particular strength in foreign exchange earnings from client activity. Further growth in net interest income was driven by improvements in both volumes and margins. The rate of increase in operating costs was contained at 6.8%, even though this was a period of substantial investment in our Global Fund Services business. Most of the increase in operating costs was incurred in the Far East where we added staff in preparation for the launch of the new Mandatory Provident Fund pension business, the revenues from which will commence this calendar year. This achievement underscores our discipline in matching operating costs to business growth."
With respect to the charge in the quarter, Mr. Gomez said; "We incurred a $10 million charge to reduce the carrying value of an investment in an electronic payment processing company, reflecting the stock's decline over recent months. Clearly 2000 was a difficult year for
e-commerce related investments in general and we considered it appropriate to reflect the write-down within that calendar year."
Henry B. Smith, President and Chief Executive Officer, commented: "I am very proud of the Bank's performance in the quarter and the half-year, which is especially noteworthy during a period of decline in financial markets. Our core businesses continue to perform very strongly and generate record results while maintaining a forward-looking focus that ensures they invest in the future. We are extremely optimistic about the prospects for our GFS business in the Far East as contributions to the new Mandatory Provident Fund business commence. In particular, I want to thank our staff worldwide for their commitment and hard work that have produced another quarter of superior results for our shareholders."
The following table summarises key performance data for the quarter and six months ended December 2000:
Quarter Ended Six Months Ended
Dec 2000 Dec 1999 Dec 2000 Dec 1999
Core Continuing Operations (1):
- Net Income (in BD$ millions) $33.7 $25.0 $64.7 $46.5
- Diluted Earnings per Share $1.19 $0.93 $2.29 $1.73
- Return on Average Common Equity 21.5% 19.1% 20.9% 18.3%
- Efficiency Ratio 70.0% 73.6% 70.5% 74.3%
(1) Results from core continuing operations exclude a charge of $10 million for an investment write-down in the December 2000 quarter and a credit of $1.5 million due to a change in accounting principle in the September 2000 quarter.
Financial Results in Detail
Second Quarter 2000/2001 Compared with Second Quarter 1999/2000
Total revenue from core operations increased by 12.3% with healthy increases in both net interest income and fee-based revenues. Non-interest income for the quarter of $65 million was up 14.6% compared with $56.7 million a year earlier. The most significant driver of revenue growth was foreign exchange earnings, which increased by over 50% from $8.0 million to $12.5 million as a result of heightened client activity following the turnaround of the Euro and during periods of increased stock market volatility. Global Fund Services fees were up 9% to $26.7 million, from $24.4 million last year, with strong performance in North America and Europe partly offset by a small decline in the Far East, where the focus has been on preparing to service the new Mandatory Provident Fund business, revenues from which commence at the start of the 2001 calendar year.
Private Trust fees of $8.1 million were slightly lower than $8.5 million a year earlier as improvements in Europe and the Far East did not offset lower income in the Americas, where record revenues were reported in the same period last year. Investment Services revenue softened slightly from recent quarters as a result of market declines but, nonetheless, was 9% higher than a year ago at $10.9 million. Banking Services fees of $6.5 million were 15% higher than the same quarter last year due to improved credit card, loan and banking fees in Bermuda.
Net interest income grew $8.4 million, or 19.3%, driven by improved volumes and margins. Growth in client deposits was reported across the Bank's operating regions with additional deposits from Global Fund Services clients contributing significantly to the increase. Higher margins were generated by a more productive asset mix and improved liability pricing.
Amounts provided for bad debts were $2.1 million for the quarter compared with $(0.2) million for the same quarter last year as we increased provisions for commercial loan exposures. Investment and other income was negative $9.1 million, reflecting the investment write-down, as compared with income of $2.6 million in the same quarter last year.
Operating costs were 6.8% higher than a year earlier with the increase concentrated in areas of investment in new business opportunities. Salaries and staff related costs were the primary driver of higher costs, producing 72.5% of the total increase. Of the increase in staff and related costs of $3.8 million, $3.2 million, or 84%, was generated in Hong Kong and was largely due to increased headcount in preparation for the new Mandatory Provident Fund business.
Net income from core continuing operations was $33.7 million, almost 35% higher than a year earlier and a record quarterly result. Including one-time items, net income for the quarter was $23.7 million.
Balance Sheet
Total balance sheet assets at 31 December 2000 were $11.4 billion compared with $10.2 billion a year earlier. Our balance sheet assets are derived from the reinvestment of customer deposits, which grew across all our geographic regions over the past year.
We have been steadily increasing investments in marketable securities and continued this trend in the current quarter. Marketable securities at December 2000 were $4.7 billion, compared with $3.8 billion a year ago. Cash and deposits with banks of $4.9 billion were $0.2 billion higher than last year as the growth in customer deposits was primarily directed towards investment in marketable securities. Loans, less allowance for loan losses, of $1.5 billion were unchanged from a year earlier.
Total shareholders' equity increased $91 million to $626 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.
Further information on Bank of Bermuda is located on the Internet at www.bankofbermuda.com.
For more information please contact:
Alison J. Satasi
Vice President, Investor Relations
Bank of Bermuda
Telephone: (441) 299-6851
Facsimile: (441) 299-6544
E-mail: Investor_Relations@BankofBermuda.com