decline, the Bank of Bermuda told its shareholders by letter, this week.

And it also warned that bank profits for the six months to December 31, 1994 are likely to be lower than in the same period in 1993 due to volatility nin the financial markets.

The half-year letter, signed by chairman, Mr. Eldon Trimingham and President, Mr. Charles Vaughan-Johnson, cited crime and the Independence issue as two stumbling blocks to business development.

The bank is encouraged by the upward trend of international business here and an economic contribution that has exceeded tourism in 1992 and 1993. In fact, the bank notes that the tourism results for last year had through December 11 shown an increase of less than one percent over the less than sparkling numbers of 1993.

And those figures have very serious implications for the industry as a provider of revenue and jobs for the majority of Bermudians, and particularly for the economic health of the hotels.

The bank advocated the use of the development plan proposed in the 1994 Commission on Competitiveness.

The extensive letter stated: "There seems to be a disinclination amongst Bermudian investors to put their hands in their pockets to invest in future commercial property development, thus limiting good quality new large office space and discouraging new and expanding investment in international business in Bermuda.

"This attitude is completely contrary to the trend and demand in international business and exempt company incorporation through 1994. We believe that this position is heavily influenced by two factors.

"The first factor is the rising incidence of lawlessness. The second is the Independence issue, which is hanging over Bermuda as an uncertain factor. The sooner the Government gets to grips with crime prevention and the Independence issue is decided, the better for Bermuda's business future.'' The statements came against a back drop of slightly higher inflation, at an annual rate of 2.5 percent, and a warning that if the current trend continued, inflation could rise to four percent by the end of the year, unless interest rates rose to dampen demand.

The bank directors said the rise in Bermuda dollar deposits (up by $90 million) reflected a continuing tendency of Bermudians to save in liquid assets until "the recession is firmly behind us''. Total bank deposits were up by $382 million.

The Bank of Bermuda, however, said that its own numbers showed a modest decrease in the surplus Bermuda Dollar deposit base between the end of 1993 and September 1994.

They said that the money supply showed a strong growth on the third quarter of 1994 (9.9 percent over the previous quarter and 15.4 percent over the same period last year.) "This has been significant compared to the second quarter growth (2.5 percent), suggesting that the inflationary tendency could continue strongly upward over the next year, especially as Government borrowing requirements for capital account are filled, since these will be external, in foreign currency.'' Shareholders of record at December 31, 1994 were paid dividends of $0.20 per share as of January 13, 1995.

The bank indicated that preliminary results show improving operating results, although as anticipated in October, they remain slightly behind the same period last year, in keeping with international banking around the world.