The Bank of Bermuda's profits continued to grow in the first quarter of 2001, despite the slowing world economy.

But the level of increase in profits at the bank appears to have slowed along with the United States economy, with net income reported at $31.7 million, up 2.8 percent from $30.8 million reported in the same quarter the year before.

For the quarter ended March 31, 2001, return on equity was 20.1 percent for the quarter.

Total revenue for the quarter was $118.7 million, a record level and 4.9 percent higher than a year ago. Non-interest income was $63.5 million, compared with $64.6 million for the same quarter last year, representing 53 percent of total revenue.

Diluted earnings per share were $1.11 compared with $1.13 a year earlier.

Edward H. Gomez, chief financial officer, said: "These results were achieved in a demanding economic environment and reflect sustained strong earnings while continuing to invest for future growth of our businesses.'' Mr. Gomez added that in comparing the quarter's results with a year ago, it was worth noting that the earlier period was a time of record earnings due to exceptionally robust market performance and trading volumes.

He added: "In contrast, the current combination of weakened sentiment in global equity markets and declining interest rates represents a restraint on both fee revenues and interest income.

"Nevertheless, net interest income was up seven percent, as we continued to attract increased deposit volumes and achieve improved yields on balance sheet assets, and we also saw promising new business in key fee-based products.'' He said that the global fund services revenue maintained a steady upward trend as new business offset the impact of the decline in equity markets.

And he added non-interest income also continues to benefit from increased client foreign exchange activity.

He said: "Disciplined expense control remains an ongoing commitment with cost increases focused on areas of business growth. Expenses in this period were seven percent higher than a year ago with over half of the increase arising in Hong Kong, where we have invested in people to service the new Mandatory Provident Fund business.'' Henry B. Smith, president and chief executive officer, said: "We are proud to announce steadfast net income growth against a particularly challenging economic backdrop. Growth in net income over the same quarter last year demonstrates improvement in recurring revenue sources and strong underlying business trends. We continue to believe that our businesses have great opportunities and view the future with excitement.'' Total balance sheet assets at 31 March 2001 were $10.9 billion compared with $10.7 billion a year earlier.

Cash and deposits with banks of $4.3 billion were $0.4 billion lower than last year as the bank continued to redirect deposit assets to investment in marketable securities.

Loans, less allowance for loan losses, of $1.5 billion were unchanged from a year earlier.

Total shareholders' equity was $632.7 million at the reporting date compared with $602.8 million a year earlier.

Henry B. Smith