Butterfield suffers major loss as share price plummets

| 03/03/2010

Cayman Islands News, Grand Cayman business news, Butterfield Bank(CNS): Despite announcing net losses of $213 million for the group this afternoon, the Managing Director of Butterfield Cayman Ltd was relatively upbeat at the press conference convened to announce the changes at the financial institution. The bank boss revealed that The Carlyle Group, Canadian Imperial Bank of Commerce and “other Institutions” had injected $550 million worth of new capital into the bank. Conor O’Dea admitted that the losses and fall in share price were bad news for shareholders but the capital injection made it good news for employees and customers.

He also revealed that the losses were mostly confined to Bermuda and that Cayman had in fact turned an audited net income of $8.7 million after making a provision for loan losses of over $6 million. “I am pleased with the Cayman results,” he said, adding that no jobs would be lost on the island and as far as customers and employees were concerned it would be business as usual for the bank.

He said there would be no name changes as a result of the new major shareholders and that the Butterfield Group was now a well capitalized independent institution, having “de-risked” with the help of the investment.

O’Dea said the bank was now clear of problematic assets, liquid clear of risk and well capitalized in excess of legal requirements. He said the future was brighter and the financial injection illustrated the confidence investors had in the banking group franchise, despite the fall in the share price. The Cayman MD said, like many banks, Butterfield had learned a lot of hard lessons in the financial crisis, and despite having a reputation for conservative lending it had been caught out by the sub prime market.

However, the cash boost would set the bank up for future growth and the institution would begin rebuilding. “What we are saying is, we are clearing out and starting over,” O’Dea said at the press briefing. “The fact that the investors have put $550 million of new capital on the table means they see value in the franchise.”

He said he was pleased for customers and employers and there was no speculation about the future as thedeal was done and the money was literally in the bank. He said the future would be about wiser investments and a different way of lending, but it would remain a conservative franchise.

In an official release the firm stated that Butterfield Bank (Cayman) Limited, a subsidiary of Butterfield Group, recorded a net income of $8.4 million for the year ended 31 December 2009, down $19.0 million from $27.4 million for the year ended 2008. Loan loss provisions increased by $7.2 million, following specific credit provisions of $6.8 million primarily related to a hospitality loan. Non-Interest expenses from continuing operations declined by $ 5.2 million.

Gains on sales of investments of $0.3 million brought reported net income to $8.7 million in 2009 compared with a net income of $78.3 million in the previous year. Net income in 2008 was impacted by the recognition of other than temporarily impaired investment losses of $29.7 million offset by Net Income from Discontinued Operations of $80.6 million following the sale of its fund services business.

Total assets now stand at $2.6 billion compared to $3.3 billion at 2008 year-end, reflecting lower level of short-term deposits from hedge fund clients. Assets under administration, at $5.0 billion, were down $0.4 billion from the position at year end 2008, whilst assets under management increased 14.6% to $857.2 million. Total capital ratio as at 31 December 2009 was 13.3%.

Butterfield Group, however, reported an audited net loss for the full year ended 31 December 2009 of $213.4 million, or $2.34 per fully diluted share, compared to audited net income of $4.8 million, or $0.05 per fully diluted share, in 2008.  These losses resulted from a write-down of mortgage-backed securities and substantially higher commercial loan loss provisions. 

O’Dea added that Butterfield prided itself on forward-thinking. “We take our commitment to our customers very seriously. We remain focused on providing excellent customer service allied to a comprehensive range of retail banking and wealth management products in the Cayman Islands,” he said.

For more details go to www.butterfieldgroup.com

Category: Business

Comments (31)

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  1. the Involuntary Investor says:

    BUTTERFIELD WIPED OUT!!!

    That’s what the headline should read.  Shareholders of the bank just had every dollar they had invested in the bank reduced to a value of about 18 cents.  That’s a good performance for a bank, I’d say.  NOT!

    I’m curious about something.  When Herr Dictator announced a tax on remittances to foreign countries, and everybody with half a brain instantly wired every cent of their money to another jurisdiction, do you think that Butterfield suffered as a result of the loss of all that operating capital?  It would be funny if the near-failure of Cayman’s flagship bank could be laid at the feet of Herr Dictator’s foolishness. 

    I also wonder when the other shoe will drop.  Shouldn’t there be an announcement now from the Cayman Pension Fund people about the catastrophic failure of all of our investment funds resulting from the Butterfield shareholder wipeout?  Just curious.

    And yes, I do have money in the pension fund, and yes, I did wire every cent of my money to another jurisdiction when Herr Dictator threatened to tax money transfers.  Maybe I helped torpedo my own pension fund.  Now that would be funny!

  2. Anonymous says:

    The accounts of the Group are also public. Now if you don’t want to read them look at the papers and news:

    CO: "Butterfield Group may incur further loss in the range of $150 to $175 million in the first quarter"

    Fitch, rating agency that is paid by BoB: "Fitch believes the pro forma equity capital provides only a modest cushion…"

    CO: "It’s business as usual

  3. Anonymous says:

     Anyone noticed they raised their fees, pretty drastically actually.  Guess my money will be moved from Butterfield to my other Bank here in Cayman.  I am not paying double for the wire transfers I make.  Physically will move the money tomorrow, and then transfer the money out.

    Too bad as Butterfield has some of the best tellers (although more automation would help).  Guess that I won’t be keeping any money in Cayman anymore and just set up a standing wire order to move the money off shore, which sounds odd as usually it is the other way around! đŸ™‚

    • Anonymous says:

      You do realize that Butterfield was LAST to raise their fees right?

      Why don’t you get all of the fees from each bank on the island and compare them? Butterfield still has some of the lowest fees, you should research more often.

  4. Anonymous says:

    It is very unsettling to know that Bank of Butterfield is going through a badpatch, which I hope and pray is only temperory.

    Should this news be an omen of further problems, got help us all depositors. As the old Cayman saying, there is no smoke without a fire.

    Like in the USA and many other countries, the Government could bail the banks and save the public, both through the FDIC and direct intervention.

    Unfortunately , we do not have the luxury.

    Henc, I request the Government to force the Banks to insure our deposits on the lines of the FDIC.  The Banks are charging us enormous fees / charges , higher interest rates for home mortgages even though the rates we get are low. They have enough cushions and profits to provide insurance to us on our deposits.

    Kindly, you are elected representatives, please be proactice and get the banks to protect the depositors her.

     

    • Anonymous says:

      Look at the public results and you will see that they don’t make a lot of money as everybody wants to say. If you force insurance then fees and rates will go further up.

      Just bank with the a better institution and let the market deal with those that are not viable.

  5. time to move on says:

    I for one will be withdrawing my money from BoB. If a bank goes bust, the ordinary savers are last in the queue to get their money back. You have to read between the lines of Conor O’Dea’s blarney , to see how bad the situation is. Job losses are coming… every other bank in this situation has fired people

    • Anonymous says:

      Staff have already been promised; their jobs are secure.

      The only way to show people like you is wait and see.

      Don’t forget who won bank of the year last year for The Banker Magazine – they’re #1!

    • Anonymous says:

      Deposits from customers are a liability to any Bank and in the event of bankruptcy would be re-paid before bond holders (next in line) and equity holders (last in line).  

      Yes Butterfield Group had a terrible year from a profit standpoint but their capital position has been strengthened as a result of this transaction. 

      You should review the facts on the press release before over-reacting.

       

  6. Anonymous says:

    Buy gold. That is the only safe thing these days.

    • Lachlan MacTavish says:

       It simply amazes me how many people "knee jerk react" to the news. In this economy mergers and buy outs can be good. It allows companies and organizations to remain stable and serve their clients. How quickly Cayman residents forget when borrowing was difficult at a local bank …..who stood up. Who was there 120% through the Ivan experience…not only the real experience but what occured during the re build. Butterfield will press on…they are my Cayman bank and will continue to be. Stop over reacting ;-)))

  7. inside job says:

    back in january – inside job called this and wrote about it on posts here on CNS… that BoB would be taken over by fcib (CIBC). this is only their first step, but they will eventually aquire controlling interest. i also said there would be job losses ( contrary to what conner is said yesterday) – but i stand by my job loss scenario.

    they just wont to it today or tomorrow, but within 18 months the job losses will start. the headcount has already been set (targeted).

    watch

    • Nonnie Mouse says:

      BoB like most local banks, are heavily overstaffed and under-automated.  They feel like entering a UK bank in the late 1970’s.   As a customer I would welcome swingeing job cuts in my bank

  8. livingcayman says:

    I guess the previous Government caused Butterfield’s financial probelms too. 

  9. Anonymous says:

    I for one thats a customer of BOB for years will be pulling my money out. There was nothen that Mr. O’Dea said that was reasuring to me i have work too hard to let my couple of dollars go down the drain. But my question is to all of these firms on the Island why do you guys wait for the last min before you let your customers know that the company is having problems  and then its too late for us as the customers to do any thing . Thats real Bull.

    • Anonymous says:

      Butterfield isn’t having problems.

      Can’t you read? ‘It’s business as usual.’

  10. Anonymous says:

    Hope it is not caused by Community College style management and loans.

  11. Anonymous says:

    All these banks are jokers.

    I am putting my money under my bed.

  12. No Sah says:

    HSBC anyone?

    I’m placing my bets on the Asians these days.

    The Anglo-Americans have clearly and utterly failed to prove themselves as prudent money handlers.

    Take a look around – not only do they not manufacture anything any longer – but they have sent all of those jobs to the Asians and decided it better to import all goods from them while at the same time shamelessly outstretching their hands hoping for the very same region to act as "lenders" – the nerve!

    Yet somehow they have managed to convince their citizens that they are the luckiest people enjoying the best economies in the world.

    Mind boggling.

    Well – they do have one thing going for them … modern day and ever expanding imperialism.

    When the worst finally happens I’m sure they’ll have many military posts for their unemployed citizens.

    • hellooo says:

      Do you realise how racist your comment was ? By the way I am black so not an Asian or Anglo defending my race!

      CNS I cant believe you approved this comment, what does race have to do with money management?

       CNS: I suspect it was a comment about money markets rather than implying that Asian people have a specific gene that makes them financially superior.

       

    • Save Cayman NOW! says:

      The Canadian Banks are run far more conservatively than HSBC, which has large derivatives exposure…

      In addition, they have retail operations here and are not reserved for the elite with large deposits to start an account…

      Chose your bank well, as this Recession is far from over and may still morph into a fully fledged Depression at the rate sovereign countries aredebasing their currencies in a race to the bottom…

      One safe investment: physical Gold or DGP, an ETN that represents Double the Gold price…

  13. Anonymous says:

    This is good. Butterfield has made a wise choice for the future!

    • Anonymous says:

      Wise choice for the future?

      They either accepted being wiped out as shareholders or they were closed with a run on deposits. Yes they made a wise choice, the only they had…

  14. whodatis says:

    The Carlyle Group?!

    Really … its like that now?

    People – are we fully understanding the characters and legacies that we are now flirting with?!

    As for O’Dea trying to assure the Caymanian clientele of there being nothing to fear – he needs to instill those sentiments into the 2 relatively high-level and in-the-know employees of his establishment who I know for a fact pulled out their PERSONAL $ from BOB in the last 2 days! They seem to have not gotten the memo.

    Carlyle Group…what’s next? Will Blackwater – oh, excuse me … "Xe" (recent re-branding – I wonder why, hmmm??) – be para-trooping in on the 13th to "secure" us during the planned little march to the LA?

    People – wake up … understand the nature of the forces that we are welcoming into our country.

    Oh what’s the use??

    For all we care about in this "beloved, God fearing and righteous country" is securing yet another buck – never mind from whence it came.

    Sad.

  15. Shock and Awe says:

    Oh joy,

    Carlyle otherwise known as War, Inc. has it’s sticky fingers in Butterfield Bank.  Never met a war they couldn’t make a profit from.

    http://www.hereinreality.com/carlyle.html

  16. Anonymous says:

    Does Butterfield Bank (Cayman) Ltd publish audited accounts for everyone to see or do they hide behind consolidated accounts and provide only Group accounts?

    If they do not they what good is the assertion that they did not lose money?

    It is time for wholly owned subsidiaries and in fact all financial and insurance institutions doing business in cayman to publish, in the press, audited financial statements.

  17. slowpoke says:

     I’m a "customer" and I don’t think being owned by the fascists at the Carlyle Group is "good news".