HSBC Bermuda's net pre-tax profit rose 15 percent to $254 million in 2010, boosted by a one-off gain from the sale of a subsidiary.Underlying profit - which strips out the $31 million booked from the transfer of HSBC Insurance (Bermuda) Ltd to another HSBC affiliated entity and the $41 million profit the unit contributed in the first half of the year - was also up by three percent to $182 million.Customer accounts grew, as did the bank's loan book, while total assets increased 10 percent over the year to $11.85 billion.Evidence of economic strain taking its toll on borrowers is evident in the bank's figures which showed a sharp rise in loan impairment charges from $6.1 million in 2009 to $10.8 million last year - but that is still at a low level relative to the bank's $3.2 billion loan book.There are signs that more people are struggling to make repayments on time. The bank's breakdown of loans and advances by risk category show that loans classed as “performing” fell from 97.5 percent at the end of 2009 to 91 percent at the end of last year, while 4.6 percent were rated “substandard” and 4.4 percent “non-performing”.In an exclusive interview with The Royal Gazette, the bank's CEO Philip Butterfield said yesterday: “It's a good performance that has come in a period of continuing challenge. Both globally and locally, things are more uncertain than they ever have been.”HSBC Bermuda's response to that uncertainty would be to “exercise a higher degree of caution and conservatism”, he added.He said the hard work of employees and the bank's fiscal discipline were key to achieving the increase in underlying profit.Record low interest rates are putting pressure on bank earnings and Mr Butterfield did not expects rates to climb any time soon.Chief financial officer Michael Schrum said the quality of HSBC's revenue was high, since a large portion of it was fee-related and not impacted by interest rates. Net interest income rose year on year, to $236.8 million from $230.4 million, while net fee income climbed to $217.4 million from $211.7 million in 2009.Mr Schrum said the bank's core Bermuda and Cayman Islands banking operations contributed $139 million to earnings, while the Global Private Banking trust businesses contributed another $28 million, with the remainder generated by overseas operations.The bank was very strongly capitalised at the end of last year with a tier 1 capital ratio - a measure of core financial strength - at 31 percent, far in excess of regulators' requirements. Rating agency Standard & Poor's affirmed the bank's AA- rating in October last year, raising its outlook to stable from negative.The CFO added that he was happy with the quality of the loan book, with total allowances as a percentage of total loans and advances to customers having climbed to 0.6 percent in 2010 from 0.4 percent in the prior year.Expenses rose to $308.4 million as general and administrative expenses jumped about 12 percent, although employee compensation and benefits costs were trimmed to $192.7 million, compared to $196.2 million in 2009.The amount of money in customer accounts rocketed to $9.71 billion, up 18 percent from $8.22 billion at the end of 2009.Mr Butterfield said the bank's aims for 2011 were threefold. To improve profitability, to mantain and improve a high standard of service to customers, including linking them with HSBC's global network, and to continuously improve efficiency and effectiveness.He also hoped to encourage Bermudians working at the bank to consider working for stints overseas within the HSBC group. “Within the past year, we've had six Bermudians working in places like Hyderabad, London, New York, Malaysia and Vancouver,” Mr Butterfield said. “They have wonderful stories to tell, of learning how to function in another culture, how they have managed to be successful outside their own country and have come back with a set of skills that will allow them to make a bigger contribution in their own country.”Last year also saw the opening of HSBC's new Harbourview building on Front Street - a move that had been very popular with staff, Mr Butterfield said, as well as customers and those using the building as a thoroughfare between Front Street and Reid Street.The CEO also highlighted two major transactions that he said illustrated the way in which HSBC could leverage its global network for the benefit of the Island. Firstly, the $500 million Bermuda government bond issue, for which HSBC was the bookrunner, and second, the financing agreement for the new hospital.Chief risk officer Sonja Salmon said the bank regarded risk management as a contributor to performance. She said that changes in regulation were a major challenge.“The regulatory environment is changing a lot and we see ourselves having to adapt, particularly to international changes,” she said.High on the list of such changes was the Foreign Accounts Tax Compliance Act (FATCA) being introduced by the US, in an attempt to better track the holdings of US citizens in order to clamp down on tax dodging.“We are trying to understand exactly what impact this will have,” Ms Salmon said. “We have a real benefit in that we are part of a large company and we can draw on resources and expertise from inside the US and outside.”Mr Butterfield added: “The world is becoming more interdependent. Globalisation is a reality and there is more global oversight of financial services. It is incremental to the cost of doing business, but it can't be ignored.”