Bermuda's newest bank, Capital G Bank, has seen profits drop from $2.8 million to under a million dollars after the bank was hit by a one-off charge when it wrote off a bad construction debt and changed its accounting policy.

But the bank's chief executive officer, Sarah Farrington, yesterday said that the bank expected profits to soar in the next year - and could reach $6 million as the bank picked up new business.

"We have seen a good growth in deposits and loans," said Ms Farrington. "And this is because people recognise good rates and good service."

Net income, or the company's profits as of the year ended January 31, 2003, stood at $793,632, compared to $2,804,426 a year earlier.

But Ms Farrington said that the bank had so far for the next six months of the year made about $3 million and was on track to make the same amount for the final six months, bringing the next year's net income to a projected $6 million. "We took a large loan loss," said Ms Farrington.

"And this combined with changes in our accounting processing led to the drop in net income."

Ms Farrington would not say what the business was they had written of the investment in, only revealing that it was a construction loan.

She also declined to reveal what the exact amount was the bank had lost in the deal, but said that in total there was $2.2 million included in the provision which included accounting changes, but a "very significant portion" of this was the write-off.

"It has been written off and is not likely to impact the figures this year," she added.

"Due to the one-off nature of this charge against income, net income will be normalised in the coming fiscal year."

"As we moved into our second full year as a bank, we made the decision to fully provide for all non-performing loans."

The accounting changes also provided for all non-performing loans over 90 days, which had previously been 180 days.

Capital G Bank, which was formerly the Gibbons Deposit Company and got a banking licence in 2001, has seen business expand massively in the last year through a new credit card scheme as well as new deposit and loans on offer, said Ms Farrington.

And the bank revealed that so far 3,400 customers had signed up for the new credit cards - the Visa Classic and the Visa Prestige. Ms Farrington added that the company had even delayed an advertising campaign because it had seen such a growth in business that it did not need the extra publicity - yet.

And she added that the number of staff had grown to fill this expansion, with 37 staff employed as of January 31, 2002, 60 as of January 31, 2003 and currently had close to 90 on their books.

"The staff we have hired are mainly senior management and we are still recruiting other staff at the moment," said Ms Farrington. The cost of salaries also jumped by $1.2 million from $3.1 million to $4.3 million during this time frame, reflecting the growth in numbers of staff, said Ms Farrington.

Total expenses for the year were $9.8 million, up $600,000 from the same period a year earlier.

Ms Farrington said that 2003 has been an important year for the bank with much of the year so far spent on building infrastructure for the bank so that it would be in a good position to launch new products for the bank in 2004, but said she was not able to say what these products were as yet.

"This included hiring key personnel as well as groundwork for product development and investment in information technology," she said.

The bank's assets grew by 15 percent and total assets by January 31, 2003 stood at $653 million.

Total loans and mortgages receivable as of the end of January 2003 totalled $457 million, an increase of $60 million or a 15 percent increase on the same 12 months a year earlier.