percent increase over the previous year.

Although the bank's revenues dropped four percent ($6.3 million) to $151.8 million, its performance for the year was helped considerably by the success of cost-cutting measures.

Total operating expenses fell by six percent ($7.3 million) to $123.4 million.

The bank cut 46 jobs during the 12 months to June 30, 1992, and managed to keep its wage bill virtually unchanged at $56.2 million.

At the same time, there were reductions in pension and staff benefits, income and payroll taxes and all other areas of expense.

On the revenue side, the bank's overseas operations again performed strongly while domestic operations did not do as well.

Revenues from the bank's overseas operations went up by $900,000 to $54.2 million.

But the bank's Bermuda operations, which included international-related business done locally, did badly with income in Bermuda falling by $7.2 million to $104.8 million.

This income included a ten percent drop in revenue from business done in Bermuda which was related to international operations.

Domestic banking revenues increased by two percent to $29.6 million, largely as a result of improved margins on the bank's Bermuda dollar portfolio and increased mortgages.

Overseas revenues accounted for 36 percent of the bank's total revenues, which was about the same figure as in 1991.

The bank suffered a 24 percent ($18.4 million) drop in net interest income to $57.6 million, largely reflecting lower US interest rates. A higher level of non-accrued interest on non-performing loans did not help matters.

Mostly offsetting this decrease were improvements in fee income of $3.1 million to $82.5 million and a $9 million increase in investment earnings to $11.7 million.

The bank's assets over the year increased by eight percent to $6.3 billion.

This reflected an increase of over $400 million in customer deposits, which rose to $5.9 billion.

The bank maintained a high liquidity ratio with 82 percent of its total assets being in the form of cash or term deposits.

The bank's risk weighted capital ratio was 14.3 percent, in excess of the 10 percent minimum agreed with the Bermuda Monetary Authority and the eight percent benchmark for banks worldwide.

In his address to shareholders, Mr. Donald Lines, the Bank of Bermuda's president, said the bank's performance had been hit by economic events in Bermuda and the major industrialised countries it derived business from.

Locally, Bermuda's Gross Domestic Product (GDP) is estimated to have contracted by four percent during 1991 after adjusting for the inflation rate of 3.3 percent, said Mr. Lines.

Between 1988 and 1991, the cumulative fall in GDP was 6.6 percent, he said.

"As a result, Bermuda's economic output is now back at the levels of the mid-1980s,'' he added.

"Tourism arrivals for the calendar year 1991 fell by 6.1 percent to 514,000 and expenditure by tourists is estimated to have fallen by 7.3 percent or $36 million to $454 million.

"The fall in tourism receipts is directly responsible for the decline in local consumer expenditures, which are estimated to have fallen eight percent in real terms, while retailers have reported that sales volumes have declined 12 percent.'' The contribution of international business also fell during 1991, with balance of payments estimates showing a fall of 2.6 percent to $343 million, said Mr.

Lines.

New company registrations fell by 5.8 percent in 1991, although the net number increased by 88 as fewer companies were struck off.

"In view of the economic decline, it is not surprising that growth in Bermuda's money supply has continued at the more moderate levels experienced since 1988,'' he said.

Combined BD$ deposits of banks and deposit companies grew by 8.2 percent ($108 million) to $1.39 billion while total loans and advances, including mortgages, grew by three percent ($37 million) to $1.17 billion.

Despite the slower growth of deposits, the net surplus of banks and deposit companies is rising as Bermuda reliquifies its economy.

"This increase in liquidity will be a critical requirement as Bermuda emerges from the current recession, for it will provide the funds which will be needed to finance future growth.

"The bank has taken steps to assist in this process by lowering the BD$ lending rate for businesses and individuals to reduce debt service costs.

Bermuda's surplus deposits, which had fallen to only $100 million or eight percent of total deposits by the end of 1989, are now $222 million or 16 percent of total deposits.'' Mr. Lines added: "The recession has also had a sobering impact on most individuals' understanding of the fragility of our economy and has led to improved levels of service as we have begun to understand that we can only compete for tourism and international business if we offer first-class service at competitive prices.'' BANK OF BERMUDA 1992 RESULTS Profit $28.4M Revenue $151.8M Expenses $28.4M assets $6.3B Liabilities $6B Basic earnings per share $4.08.