The Bank of Bermuda yesterday reported that its net income soared 40 percent in the first half of its financial year.

The bank earned $27.4 million in the first six months to December 31, compared to over the $19.6 million earned in the same period in 1996.

"We have seen improved performance in all regions in just about every office,'' the bank's Chief Financial Officer Edward Gomez said yesterday. "On the fee revenue side, we have experienced growth in corporate trust, investment services and foreign exchange earnings. Interest earnings are also up as a result of higher volumes and improved margins.'' Mr. Gomez said the bank's total revenues increased 21 percent to $153 million over the same period in 1996. Of that fee revenues increased 22 percent to $101 million. Interest earnings rose by $13.4 million to $46.7 million.

President and chief executive officer Henry Smith said the bank's strong performance was a result of a changing organisation that was continuing to grow the business.

"We are poised and on the right track,'' he said.

The bank benefited from Asia's financial problems during the first financial quarter. Increased trading pushed up the bank's fee revenue as clients moved in and out of the market.

"While the bank's Hong Kong operation benefited from the effects of market volatility on our interest earnings and transaction related fees, we do not expect to see such a strong performance in the second half due to anticipated lower asset values and decreased trading activity,'' he said.

In an interview Mr. Smith said the bank's Hong Kong performance was expected to drop off as the bank's custody and administration fees were based on mutual funds' net asset values (NAVs). As those NAVs fell due to the effect of the Asian slump, the bank's fee revenues were also expected to fall.

"We have had a great first half,'' Mr. Smith said. "But we are looking at what's happening in Asia with some concern.'' At December 31, the bank's total assets were $10.4 billion, a gain of $500 million or five percent over a year earlier.

Mr. Gomez said the growth in the asset base was driven by the $9.8 billion in deposits the bank held worldwide. Deposits grew by $475 million over the same period a year earlier.

Meanwhile, expenses grew by $16 million to $119 million in the six months to December 31. The increase was mainly due to an increase in the number of staff to support the bank's growth, Mr. Gomez said.

The Bank of Bermuda share price traded at $31.75 yesterday, a gain of 50 cents.

The bank recently announced it would be asking Parliament to exempt it from the rule requiring local companies to be 60 percent owned by Bermudians. The proposed exemption will be a preliminary step towards the bank making a secondary listing of its shares on a US stock exchange.

Henry Smith Graphic file name: HSMITH