profits reaching $32.5 million, up over 50 percent on the same period the year before.

Bermuda's largest bank attributed its increase in profits to strong performance driven by a continued growth on core earnings.

The bank, which is headquartered in Hamilton with offices in Cayman, Dublin, Guernsey, Hong Kong, New York, Isle of Man, New Zealand and Singapore, reported diluted operating earnings per share of $1.10 and increase of 37.5 percent from the 80 cents reported for the same three months ended September 30 last year.

"We are obviously delighted to follow last year's excellent performance by reporting first quarter results of this magnitude,'' said Henry Smith, President and Chief Executive Officer of Bank of Bermuda.

"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 belief that all of our businesses are well positioned for future growth and that ongoing investing trends will continue to drive demand for our service.'' The bank not only provides banking services to customers in Bermuda, but also does the main bulk of its work in trusts, asset management, fund administration and global custody services for private, corporate and retail clients.

The bank reported return on equity was 21.3 percent, higher than the 17.4 percent in the same period last year.

Fee-based revenue growth was led by a 38 percent increase in investment service fees, which continued to benefit from strong performance by our All Points Multi-Manager investment vehicle.

Net interest earnings were also higher as a result of volume growth combined with improved margins.

"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,'' said Edward Gomez, chief financial officer at the bank.

Mr. Gomez added: "We also continue to maintain our close guard on operating costs. The 21 percent increase over prior year revenue was achieved with a 14 percent increase in operating costs. The result was a further improvement in Bank of Bermuda's efficiency ratio of 70.9 percent.'' In the first quarter of the bank's financial year which ended September 30, total revenue increased 20.8 percent to $114.3 million, up from $94.6 million in the first quarter of last year. The growth was generated by a 37.5 percent improvement in net interest income combined with healthy increases in non-interest income, up 7.7 percent.

Non-interest income for the three months of $59.4 million compared with $55.2 million a year earlier.

Over 70 percent of the year-on-year growth was generated by investment services, where fees were up 38 percent due to the continued success of anew investment products, according to the bank.

Global Fund Services fees were up 4 percent with strong performance in North America. In Europe, the loss of a very significant Global Fund Service client in the prior year is reducing the benefit of new client wins, the bank said.

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 calender year.

Private Trust Fees were 12 percent higher than the same quarter last year with growth in North American and the Far East. Foreign Exchange activity was little changed an earnings were down 1 percent. Banking Services fees were 7.8 percent lower than a year earlier with a $0.5 million decline largely in Bermuda.

Net interest income grew $14 million or 37.5 percent 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, down from $1 million provided 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 e-commerce related potential costs.

The bank said it achieved a 20.8 percent growth in total revenue with a 13.9 percent increase in operating costs. Salaries and staff related costs were the primary driver of higher costs, mostly due to an increased head count in the Far East in preparation for work generated by the new Mandatory Provident Fund business.

Annual salary rises in the quarter also impacted. 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 percent higher than a year earlier and a record quarterly result. The bank 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.

Total balance sheet assets were recorded at $11.5 billion, up on the previous figure of $9.9 billion.

This figure is made up from the reinvestment of customer deposits, which were impacted by some short-term balances from mutual fund clients over the reporting date.

Total shareholder's equity increased $109 million to $618 million at the reporting date, primarily reporting the retention of earnings and the exercise of the Bank's Millennium warrants during the year.

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