Bermuda Commercial Bank Ltd. reported a 48 percent increase in net income for the six months ended March 31, 2005. The company's net income climbed to $2.23 million from $1.51 million up to March 31, 2004.

With interest rates rebounding from a period of historical lows, BCB said in its earning statement that it continued to benefit from its policy of preserving a highly liquid balance sheet while maintaining a low risk, fee income driven policy. Cash and cash equivalents now make up more than 99 percent of the bank's total assists.

The bank said that this policy along with its “solid history of profitability” has contributed to its generation of a “substantial capital base and industry-leading capital ratios”.

President and Chief Operating Officer Timothy Ulrich said that with the consolidation of the high growth levels achieved in deposit balances over the last number of years, the bank is now positioned to maximise revenue streams from the current rising interest rate environment.

He said that significant fluctuations in deposit balances were viewed as part of the bank's normal business operations and were due to client cash flow requirements, emphasising the fact that the size of the balance sheet is strongly driven by changes in client activity over time.

BCB said in its statement that its investment policy created “an extremely liquid, low risk balance sheet of its clients and shareholders and in times of rising interest rates, it also offers the potential for strong income growth”.

The US Federal Reserve's implementation of seven 0.25 percent increases in the Fed Funds Rate since last June resulted in a strong year-on-year increase in interest earned by BCB on its core dollar deposits.

Net interest income increase 67.9 percent to $3.76 million in the period while other income increased 9.6 percent to $3.2 million. The bank said that fees and commissions increased on a strong contribution from fee-based activity generated by clients utilising the bank's traditional banking and custodial services, together with new and existing clients using online service. The bank also benefited from continued turbulence in the international currency markets with double-digit growth in foreign exchange commission fee income.

Total expenses increased 29.6 percent to $4.73 million on a prior year net recovery on mortgages within the bank's declining loan portfolio, investments in employees and technology, higher legal costs and increased marketing and compliance costs.

Senior vice president Dominque Smith said that the bank is now seeing the benefit of its investments in enhancing and upgrading its core banking and Internet banking systems which include increased back office efficiencies, a more user friendly staff interface and improved client service functionality.

Bank chairman and CEO John Deuss said that BCB's strategy continued to emphasise full automation, on-line delivery of services and a liquid balance sheet. The bank is also maintaining its low, almost no-risk, fee income driven profile and the bank will continue to provide personal, flexible service as both the bank and its eBanking platform are continually upgraded to offer increasingly enhanced products and services to the bank's client base.

The bank maintained the half-yearly dividend of 0.225 cents per share to be paid on May 26 this year to shareholders of record as of May 18 this year, representing 44.1 percent of earnings for the six months ended March 31, 2005.