The Bank of Bermuda's profits dropped by 32 percent compared to last year as the global recession and record low interest rates took their toll in the first half of 2009.

The bank recorded consolidated net profits of $110 million for the six months ended June 20, 2009, while consolidated net operating income was down 17 percent on last year at $283 million over the same period.

But the bank boosted its total assets by one percent, or $97 million, to $10.4 billion during the first six months of the year and grew its Bermuda residential mortgages by $56 million, or four percent, since the start of 2009.

It managed to cut operating expenses by one percent to $160 million in the six months to June 30, 2009, versus the same period last year, at the same time as retaining its AA- rating issued by Standard & Poor's.

Philip Butterfield, CEO of the Bank of Bermuda, which is rebranding as HSBC, the name of its parent group, said he was pleased to have achieved strong results in the bank's banking and insurance operations during the first six months of this year, adding that its operating performance had proved resilient in tough market conditions.

"What we experience here in Bermuda is no different from the experience that other financial institutions across the world have had in 2009," he said.

"The impact of the global recession and turmoil in the financial markets leaves us with interest rates that are at record lows and there is very little opportunity to earn attractive yields and that has had an impact on our ability to generate profits."

He said that, put into context, to make a $110 million profit in a very challenging environment was an achievement to be proud of and his team should allow themselves a pat on the back for their efforts.

"Our Bermuda-based banking and insurance operations continued to perform well during the first half of 2009 with our banking businesses achieving a net profit of $74 million and our insurance business a net profit of $29 million," he said.

Mr. Butterfield attributed the strength in the bank's insurance and banking operations to the leadership of the business, which had instilled a sales culture throughout the organisation, making it more effective in revenue generation and having a direct impact on its bottom line.

Allied to this has been the successful roll-out of the bank's Bancassurance product (including commercial and retail) in partnership with BF&M, with plans to launch it to the private banking market in the autumn, with high expectations for its development in the future, according to Mr. Butterfield.

He said the introduction of new technology, the re-engineering of processes and the outsourcing of work to other jurisdictions had made the bank more efficient and cost effective, while he was looking a other ways to improve the overall performance of the business further down the line.

Having been able to maintain its AA- credit rating was testament to how well the bank had managed its balance sheet, particularly the quality of its investment and lending portfolio, Mr. Butterfield said.

"For the jurisdiction, it is a good news story that a bank of our size has done as well as it has," he said.

"We want to give great comfort to people in the international business sector doing business with us currently and in the future."

Michael Schrum, chief financial officer at the Bank of Bermuda, pointed out that this year's results should be taken in light of the bank's record results in 2008 and the past year's economic downturn since.

However, he cited the bank reaping the rewards of a new banking platform and treasury system implemented in 2006, meaning it did not have to invest as much in its infrastructure, as reason to be upbeat in terms of its track record and performance going forward.

Last week, Butterfield Bank announced that former Bank of Bermuda chief operating officer Michael Collins had joined its ranks as executive vice-president of corporate development. Mr. Butterfield said that he respected Mr. Collins' decision to leave and wished him well in his future success.