The Bank of Bermuda yesterday reported a 12 percent rise in total revenue to $109.3 million.

Fourth quarter diluted earnings per share were also up and operating costs were down.

In addition, the good news for shareholders included a rise in earnings per share to $2.53 on a full year basis, up 32 percent from 2001 and a record $264.3 million in fee revenue.

Negative trends included a slight fall in interest income, a decline in investment services fees due to lower client trading volumes; and a fall in banking fees from $6.7 million to $5.9 million.

The banking fees apparently suffered due to costs associated with discontinuing a credit card incentive programme.

The decrease in interest income resulted from a fall in average interest earning assets such as deposits, marketable securities and loans.

Chief financial officer Edward H. Gomez said that despite a year of tough investment conditions in which net interest income fell six percent “new business wins more than compensated for the down-draft of weak equity markets, and fee revenues for the year were a record $264.3 million and 63 percent of our total revenue base.”

He added: “At the same time we kept a tight rein on discretionary costs, while holding our global staff levels steady, which both protected our margins and maintained our ability to take on new business.”

Mr. Gomez reported that in the face of market volatility the bank had decided last quarter to decrease its outsourced trading portfolio:

“That has now been accomplished; portfolio size was reduced from $1.3 billion to $500 million in three steps over the course of the quarter to minimise market disruption.”

These steps reflect the more conservative approach that the bank is now adopting to investment:

“Our asset base is liquid and short duration, in order to match the characteristics of our deposit base, with a substantial portion of our assets in capital efficient securities of OECD financial institutions and governments.”

This risk averse approach make net interest margins an ongoing challenge in this climate of very low interest rates, said Mr. Gomez.

The bank appears to be marketing itself as a “safe option”, chief executive officer, Henry B. Smith, said. “The current economic uncertainty strengthens our appeal and competitive positioning as a quality provider in well-regarded jurisdictions.”

Highlighting the achievements of the past year, Mr. Smith said:

“We have added new clients and strengthened relationship with important intermediaries; we have delivered important new technology for our clients; we have built on our position in markets where we believe we have compelling opportunities; and we have further enhanced our compliance and corporate governance functions.

“We are also seeing signs that the current economic uncertainty strengthens our appeal and competitive positioning as a quality provider in well-regarded jurisdictions.

“Our goal for 2003 is to build on this strengthened base with disciplined business growth in key markets, delivered by an efficient, highly skilled and relationship-focused organisation.”