It has been a tough year for the Bank of Bermuda which reported fourth quarter earnings which included lower earnings per share due to poor markets around the world as well as litigation costs.

The bank reported fourth quarter diluted earnings per share from core operations of $0.80 compared with $1.05 from core operations in the same period last year.

Total revenue for the quarter was $97.4 million compared to $105.8 million in the same period last year and excluding investment and other income, core operating revenue was $113.2, slightly lower than $114.8 million in the previous year.

Global Fund Services (GFS) was the driver of fee revenue growth, increasing 15.5 percent to $30.8 million from $26.7 million a year ago. GFS fees represented 46 percent of total non-interest income for the December 2001 quarter.

The Bank says that all geographic regions reported growth due to new business activity that compensated for the effect of market declines on the value of existing client assets.

In particular, the Bermuda office reported higher global fund service fees of $1.8 million and Dublin was up $0.7 million, a 34 percent increase.

On a US GAAP (Generally Accepted Accounting Principles) basis, diluted earnings per share was $0.04, reflecting the net cost of single payments, largely relating to charges for potential litigation costs and investment valuation provisions in the fourth quarter.

For the full year 2001, diluted earnings per share from core operations were $3.38 compared with $3.99 in the prior year. On a US GAAP basis, full year diluted earnings per share were $1.91 compared with $3.77 a year earlier.

Edward H. Gomez, Chief Financial Officer said: "This quarter closed a challenging year for Bank of Bermuda.

"While our core businesses performed well given the difficult economic backdrop... we took a prudent stance in providing for potential remaining litigation costs and investment valuation provisions in the fourth quarter. We provided an amount of $10 million for remaining potential liabilities and expenses in connection with the Cash 4 Titles litigation. We also recorded net investment expense of $15.8 million in the fourth quarter, largely reflecting provisions against declines in investment valuations."

Mr. Gomez added: "The above one-time items detracted from our core business performance. Fee revenues of $67.5 million in the fourth quarter were a record. Our largest business, Global Fund Services, was the primary driver generating 15.5 percent growth on robust new business.

"This is a significant achievement in the current environment and demonstrates our firm base for future growth. We believe that the strength of our core businesses will be more clearly visible in the 2002 financial year."

Chief Executive Officer Henry Smith said: "We have finished the year in a strengthened position to deliver improved value and sustained growth for our shareholders.

"While we faced particular challenges in the current year, we also built on our fundamental strengths in providing highly specialised services to global clients."

Mr. Smith said the quality of the Bank's service remains a core strength and added: "This was particularly evident in 2001 as we delivered seamless service to our clients in times of considerable global uncertainty, particularly in the aftermath of September 11."

Mr. Smith added: "I am also delighted to announce that we have been successful in our application for a Dublin banking licence as we consider our growing Dublin presence to be a key building block in our European strategy."

Private trust fees were $7.2 million, down from $8.1 million a year earlier, which the bank said reflected lower client asset values due to several factors including weakened equity markets.

Investment service fees of $10.6 million were down slightly from last year but nine percent higher than the third quarter.

Foreign exchange earnings of $10.8 million for the quarter were $1.7 million less than a year earlier when earnings were particularly strong during a period of heightened volumes due to stock market volatility. Banking service fees of $6.7 million were up four percent.

Net Interest income was $46.4 million, down from $52 million as the Bank said sustained interest cuts eroded margins on the reinvestment of free and low interest bearing deposits.

Investment and other income was a net loss of $15.8 million for the quarter. Operating expenses of $85.4 million were up 5.4 percent from the year before, and income taxes of $1 million for the quarter were unchanged from a year earlier.

The Bank provided an additional amount of $10 million in the quarter to cover potential liabilities and expenses associated with the Cash 4 Titles litigation and recorded a net reduction of $3.9 million in insurance receivables in connection with this action.

Net Income from core operations was $25.1 million compared with $32.8 million last year and net income in accordance with US GAAP was $1.4 million compared with $23.7 million in the December 2000 quarter.

The Bank's total balance sheet assets at December 31 were $10.8 billion compared with $11.4 billion a year earlier while total shareholder's equity was $629 million at the reporting date compared with $626 million last year.