The Bermuda Commercial Bank yesterday reported an $5.16 million profit, despite seeing a loss of nearly $150 million in deposits as client investment funds hit by the global financial crisis withdrew their money.

BCB president John Sainsbury said the bank had avoided the risky investments which had caused others in the industry around the world to post huge losses, but warned that shareholders will likely see their dividends cut next year if low US interest rates persist.

Profit for the financial year ended September 30, 2008, was down 13 percent from the previous year and broke down to 85 cents per diluted share, compared to $1.08 per share, or $5.94 million in 2007.

"While 2008 net income failed to match 2007 levels, we did not see any of the large losses which are currently having such a devastating impact on global banking profitability," Mr. Sainsbury said. "BCB has no credit investments and no derivatives and our liquidity is second to none.

"We did not invest in any of the markets or products that are now causing such problems around the world."

He added that conservative policies had meant the BCB "did not fully share in the fruits of the boom years", but that this approach was now serving the bank well during the worldwide financial turbulence.

The crisis did however impact on the bank through the loss of some clients and their funds. The BCB's total assets at the end of September were $486.84 million, compared to $621.55 million a year earlier, a decrease of $134.71 million, or 21.7 percent.

""This reflects a corresponding $147.91 million decrease in client deposits," Mr. Sainsbury said. "BCB is banker to many large mutual and hedge fund clients, which over the last couple of months have seen their subscription levels drop dramatically."

Custody and fund administration revenue decreased by $480,000, with the withdrawal of a number of large clients in the second half of the year, the BCB statement said.

Net interest income declined by $1.85 million, from $10.51 million in 2007 to $8.66 million, partly because of the interest rate cuts to historically low levels by the US Federal Reserve, America's central bank.

Many investors around the world have withdrawn money from investment funds as stock markets have plummeted. Many hedge funds have been forced to scale down their investment of borrowed funds in recent weeks and some have even closed down as the plunging value of their investments has resulted in margin calls from their creditors.

The BCB's fee and other income fell by $160,000 to $5.05 million for the year ended September 30, despite a $470,000 gain resulting from the initial public offerings (IPOs) of credit card giants Visa and MasterCard.

Mr. Sainsbury said the BCB board had approved a half-yearly dividend of 40 cents per share, or 80 cents for the full year.

"This dividend represents 88.9 percent of annual 2008 earnings and generates an annual yield of 7.1 percent, based on the average fiscal year 2008 trading price of $11.28 for the bank's common stock," Mr. Sainsbury added.

"If current low interest rates continue, and we expect that they will, this will have a negative impact on the bank's profitability levels for 2009 and it will not be possible to maintain the current dividend level."

BCB, which is primarily focused on serving the international business community, was established in 1969, and is 47 percent owned by First Curacao International Bank.