Butterfield sees full-year core earnings, net income growth

Butterfield increased net earnings by $38.2 million to $115.9 million in 2016. Core earnings for the full year were $138.6 million, an increase of $24.7 million compared to 2015, the banking group announced last week.

In September 2016, Butterfield completed its initial public offering on the New York Stock Exchange, a move that improved liquidity for shareholders and the bank with access to international capital, said Michael Collins, Butterfield’s chief executive officer.

“In 2016 we achieved a core return on average common tangible equity of 20 percent, an attractive return considering that two-thirds of our assets are held in cash and securities, which are invested primarily in lower risk U.S. government and federal agencies,” he said during an investor call.

Butterfield’s Community Banking and Wealth Management businesses “performed well” in 2016, leading to a 22 percent increase in core net income, he added.

During the year, the bank acquired and integrated HSBC’s wealth management business in Bermuda and completed the wind-down of its U.K. private bank.

Mr. Collins expects the bank’s leading market share, high barriers to entry and pricing power in each of its jurisdictions to generate excess capital that will be used in part to build the bank’s wealth management business through trust acquisitions.

“With a long and recognized history of structuring trust for mobile ultra-high net worth families, we’re well positioned to service the global private wealth business, emanating from Asia, Europe and Latin America,” he said.

During the call, the bank’s chief financial officer, Michael Schrum, said Butterfield is specifically looking at private trust companies in Bermuda, Cayman and Jersey but it would invest “methodically and cautiously” in a process that takes time.

In 2016, Butterfield delivered year-over-year improvements in both non-interest income and net interest income, Mr. Schrum said.

Non-interest income rose by $7.3 million based on higher banking fee revenues, trust services revenues and asset management revenues, which were supported by the acquisition of HSBC Bermuda’s private banking investment management and trust businesses.

This acquisition was also largely responsible for the year-on-year increase in deposits of nearly $1 billion, which, against a backdrop of limited loan demand, led the bank to direct more funds to its investment portfolio, which grew from $3.2 billion at year-end 2015 to $4.4 billion at year-end 2016, Mr. Schrum said.

Butterfield invested primarily in U.S. government agency securities, and 93.7 percent of the bank’s investment portfolio is held in A-or-better-rated securities.

“The asset quality of the bank’s loan portfolio is similarly strong, with non-performing loans as a percentage of total loans amounting to 1.6 percent,” Mr. Schrum said.

Despite higher salary and other costs from the HSBC Bermuda acquisition, $8.5 million in costs related to the IPO in September and significant redundancy costs associated with the winding down of the bank’s London business, operating expenses rose just $0.7 million to $285.9 million last year.

Butterfield had total assets of $11.1 billion at the end of 2016, up $0.8 billion from Dec. 31, 2015.

The board declared a dividend for the fourth quarter of 2016 of $0.32 per common share, a three-fold increase from the prior quarter and the same quarter in the previous year.

News source: Cayman Compass

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