Bermuda Commercial Bank's profits in real terms have risen by nearly 30 percent during the last year to $2.6 million, despite a challenging environment for banks around the world.

And the bank, which has its offices on Victoria Street, has seen customer deposits rise 47 percent to $785.9 million for the financial year ended September 30.

“As with all banks and companies in the international financial services business, BCB is experiencing a challenging period as we have had to come to terms with the ongoing and far-reaching effects of the tragic events of September 11th and the war against terrorism on the already depressed global economies and the cost of doing business after the terrorist attacks,” said Timothy Ulrich, president and chief operating officer of the bank.

Customer deposits rose 47.4 percent from $533.23 million by $252.71 million and Mr. Ulrich, said that he was pleased with the growth in customer deposits considering that the US dollar interest rate environment is at lows last experienced in 1958.

The bank said the average balance of customer deposits for the entire 2003 fiscal year was only slightly higher when compared to average balances held during fiscal year 2002 and significant fluctuations had to be viewed as part of normal business driven by client cash flow requirements.

Net income of $2.6 million for the year ended September 30, 2003, is listed as being before discontinued operations.

While the bank said there were no discontinued operations for 2003, in 2002, the bank had several out of the ordinary cash additions.

One included a $2.38 million recovery for “unauthorised transactions” of a former employee.

Another, of $857,000, was the profit the bank made when it sold property in Bermuda. With these two charges, net income for 2002 was $5.28 million, but if they are not taken into account, the bank made $2.05 million.

Total assets were $836.73 million at September 30 compared to $582.74 million at September 30, 2002, an increase of $253.99 million or 43.6 percent.

At September 30, cash and cash equivalents represented 99.3 percent of total assets compared to 98.6 percent at September 30, 2002.

The bank said that this emphasises BCB's policy to preserve a highly liquid balance sheet, while maintaining a low risk, fee income driven profile adding that the increase in total assets is fuelled by growth in customer deposits placed with BCB.

“While BCB's investment policy creates an extremely liquid, low risk balance sheet for its clients and shareholders, it exposes the bank's net income to vulnerability with changes to the interest rate environment,” said the release.

Net interest income declined from $5.38 million at September 30 to $4.76 million at September 30, 2003, a decrease of $620,000 or 11.5 percent, largely a result of “exceptionally” low interest rates.

Total revenues increased to $10.19 million for the year ending September 30 compared to $9.48 million for the prior year, an increase of $710,000 or 7.5 percent, due to a 30.7 percent increase in fees and commissions and a 40.4 percent increase in net foreign exchange gains which contributed $1.28 million in additional client generated revenues.

The increase in fees and commissions is attributable to a combination of new business and a modification of the bank's fee structure, which had not been changed since 1993.

As the bank holds no investments other than cash and cash equivalents, no investment income was reported for fiscal year 2003 or 2002.