second quarter to December 31, bringing profits to a record $20.2 million for the first half of the fiscal year.

The $20.2 million is an increase of 46 percent over the same period 1996, when net income for core business was $13.8 million, when money-losing operations discontinued in the financial year to June 30 are excluded. The bank shed its Singapore business and parts of its UK operations -- which lost a total of $704,000 -- in the first half of last year, when John Tugwell was at the helm.

The bank's stock shot up to a record high of $16.75 yesterday on the Bermuda Stock Exchange (see story below).

The continued increased profitability into the second quarter is an indication that the cuts are working, First Bermuda Securities vice president of investment services Randy Somerville said yesterday.

"I'm mildly surprised that they are able to do so much with all of the cost cutting measures -- including the cuts to staff -- that they have taken,'' Mr.

Somerville said. "It looks like a pretty good turnaround. They deserve a lot of credit for the cost reduction steps taken under Tugwell. It seems to have provided some early dividends.'' Half-year earnings per share was 99 cents, compared to 68 cents when discontinued operations are excluded from the financial mix.

Total income for the first half of the current fiscal year increased about 11 percent to $74.1 million compared to the same period in 1996. Expenses during the first half increased two percent, or about 1.1 million to $53.9 million over the same period in 1996.

"The group's improved performance clearly reflects the progress made since the financial year started,'' bank president and chief executive officer Calum Johnston said in a press release. "We intend to follow a sensible programme of concentrating on our solid core businesses in the second half of the year, while carefully managing expenses and seeking the right opportunities for expansion.'' Mr. Johnston said the bank would also continue to focus on improving services.

The bank would continue to hold down expenses through greater use of technology, introduction of an enhanced early retirement packang, and the leasing of excess floor space in Bermuda.

"Expense management is essential to the bank's ongoing plan to lower its cost base,'' the bank stated.

The bulk of the bank's interest and non-interest income comes from its Bermuda-based treasury and asset management plus its operations in the Cayman Islands and Guernsey.

The bank also identified its Bermuda banking operation as having "considerable potential'' for improved profitability. Both the Cayman and Guernsey operations continue to grow the bank reported.

Return on equity improved to 14 percent from 9.1 percent, and return on assets rose to one percent from 0.63 percent. Total assets increased to $4.59 billion at December 31, 1997, a growth of nine percent from the $4.2 billion at the end of 1996.