Bermuda Commercial Bank Ltd. (BCB) saw its profits plunge by $3.71 million over the past six months and cut its semi-annual dividend to zero.

The bank reported net income of $680,000 for March 31, 2009 compared to $4.39 million at the end of March 2008, with earnings per share down at 11 cents versus 75 cents a year ago.

Net interest income for the period was $3.37 million compared to $5.43 million for the same time in 2008 due to the dramatic reduction in global and, in particular, US interest rates to historically low levels.

"In light of the reduction in net income and with no expectation of a near-term recovery of profitability, the board has decided not to pay a semi-annual dividend at this time," read yesterday's BCB statement.

BCB's strategy to invest 100 percent in cash and cash equivalents to ensure maximum liquidity and minimal credit risk, however provided low returns in such a low interest rate environment, while the current economic turmoil continued to impact customer deposit levels.

The bank's fee and other income decreased by $2.04 million to $1.52 million, mainly in its fund administration and custody divisions following the loss of two big clients which moved jurisdiction.

But the prior year fees were boosted by a one-time gain of $740,000 from Visa and MasterCard Initial Public Offerings, yet the global slowdown also resulted in a $270,000 reduction in earnings and foreign exchange transactions due to reduction in volumes.

Total expenses, meanwhile, were down to $4.21 million versus $4.6 million for the prior year period, representing a drop of $390,000, or 8.5 percent, resulting from a fall in performance-related employee compensation costs.

Furthermore, BCB's balance sheet suffered the knock-on effect from the financial downturn, which heavily impacted the transaction flow and deposit levels of some of its larger customers.

Total assets declined by 10.6 percent from $486.84 million at September 30, 2008 to $435.36 million at March 31, 2009, with total assets at $696.45 million by the end of March last year.

There was however, some positive news for investors, with the bank declaring it was well capitalised and remained fully invested in short-term cash and cash equivalents, while suffering no direct exposure or losses due to the sub-prime crisis and its capital ratios were significantly higher than industry standards.