Butterfield battles on in face of tough times

| 06/08/2010

(CNS): Butterfield Bank still faces major challenges its management team have said in the wake of their second quarter results for 2010. With a net income of $0.2 million things are still tough for Bermuda’s oldest Bank. “Butterfield continues to operate in difficult economies with continued historically low interest ratescompressing margins and yielding lower investment returns,” said Brad Kopp, Butterfield’s President & Chief Executive Officer. “Against this backdrop, the Bank remains focused on expense management.  We also took further steps in the quarter to de-risk the balance sheet, selling one of our remaining Structured Investment Vehicle investments, thereby reducing our exposure by $31.6 million and realising a gain of $5.0 million.” (Photo Dennie WarrenJr)

He added that this was offset by additional required reserves on two hospitality loans. “Such actions further strengthen our balance sheet and help position us for future growth.”
Management said the comprehensive recapitalisation of the Bank this year involved the largest ever Rights Offering in Bermuda during the quarter, which enabled the legacy shareholders to purchase up to $130 million of Rights Shares to increase proportionately their ownership interest in the Butterfield Group.  The Rights Offering closed on 11 May 2010 with the Bank’s legacy shareholders and other investors having expressed confidence in the Bank, as evidenced by an oversubscription of the Rights, Butterfield said in a statement. 
The bank claimed that shareholders’ equity was bolstered by changes to post-retirement health care benefits and improvements in market values of investments. “Following an independent, tri-annual actuarial review, the healthcare liability was reduced by approximately $27 million reflecting changes in demographics and claims costs since 2007,” it said.
The bank also amended the plan in the quarter for eligibility, benefits and cost sharing criteria which resulted in a further reduction of approximately $41 million. As at 30 June, the Bank still has a substantial obligation for post-retirement benefits in the amount of $78.7 million.
Kopp said the bank’s primary responsibility was to reward shareholders’, customers’ and employees’ loyalty by returning the Bank to profitability and rebuilding sustainable value in the Butterfield franchise.  “With a further de-risked balance sheet, a strong capital position, sound operating structure and a great team of dedicated employees, I am very confident in our ability to achieve that goal,” he said.
At 30 June 2010, Butterfield had a tangible common equity ratio of 6.1%, total capital ratio of 21.7% and tier 1 capital ratio of 15.9%. Additionally, the Bank’s net book value per share increased to $1.17 per share, up from $0.99 per share at 31 March 2010.
Michael Collins, Senior Executive Vice President, Bermuda said it was clear the bank continued to face challenges when it came to generating revenue a problem he said for many international financial institutions in the current economic climate.
“In that regard it is positive to note that non-interest income year-over-year has held firm, whilst net interest income before provisions for credit losses was 7%, or $3.3 million, lower at $42.7 million in the quarter. Our deposits have remained stable, despite the economic difficulties in the markets in which we operate, which is encouraging, though we continue to see increases in loan and mortgage delinquency rates,” he said. “We remain focused on cost containment and have lowered expenses by $3.5 million versus a year ago whilst making appropriate investment to ensure the Bank’s offerings are best in class.”
Meanwhile, in the Cayman Islands the bank generated a net income of $0.8 million for Q2 2010 down $1.8 million on Q2 2009 as a result of additional loan loss the bank said. Total revenues of $13.7 million were $2.8 million below Q2 2009 results primarily due to the increased specific loan loss provisioning on four properties, which was slightly offset by an increase in non-interest income for Q2 2010.
Non-interest income of $ 9.2 million in Q2 2010 was up 10.4% from volume-driven foreign exchange and card processing as well as equity from Butterfield’s investment in Island Heritage Insurance.
Total assets at the end of Q2 2010 were $ 2.2 billion down $365 million from year end 2009, reflecting the strong hedge fund subscription cash inflow cycle seen prior to the Bank’s most recent year end.
Loans increased by $9.4 million over twelve months, with growth in the personal lending portfolio offset by a marginal contraction of the commercial loan portfolio and prudent loan loss provisioning. Client assets under administration ended Q2 2010 at $4.6 billion representing a decrease of $127 million from Q2 2009, whilst assets under management declined by $145m reflecting the turbulence experienced in the financial asset markets.
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  1. Anonymous says:

    I better take my deposit and move it elsewhere.

  2. anonymous says:

    Butterfield Bank has served these Islands for a very long time and they are very reliable, especially with their online services and customer services.  It would be a pity to lose such an incon in Commercial Banking, on these Islands.  We need to come together on these Islands and Pray Religiously for them to survive, as these Islands can ill afford to lose their services.  They have too many Caymanians employed there and if they should have to release those people from their jobs, what a mess these Islands will be in. Sad Sad day if that should happen.  That is nothing to rejoice about my dear friends.

  3. Anonymous says:

    Still better than all the other banks here. Customer Service is great and you never have to worry about your debit card working anywhere. Can’t say that about the majority of the other banks here.

  4. Anonymous says:

    Erm, US$200,000 does not even cover their class a bank license fee which is currently $750k.

    • da Bone says:

      errm as this is net income it obviuosly already has covered the license fee, anf this is the income after it has been paid.

      ALso it is for a quarter, so the licence fee would be 750,00 divided by 4  which is 187,500, which is less than 200,000

      So your point really is an epic fail dude

      • O'Really says:

        $200k is also the consolidated group profit. BofB locally made around $850k in the quarter. I think they have their licence fee covered.

  5. Anonymous says:

    Poor old BoB!! After years of record profits and sticking it to the little guy with shy high rates and fees, I can’t help but to not cry for ya!!!!

    After years of the banks licking their chops, and hauling in piles of cash, they now make less; we bo hoo poor you!! NOT!!!

  6. Margarine Pastures says:

    The news emanating from this institution over the past couple years has not been good and the hard working depositors who have committed all their savings do need to be rather solicitous of the fact that neither the Bermudian or the Cayman governments are in a position to offer any form of bail out in the event of the proverbial hitting the fan.


  7. Anonymous says:

    What on earth? $200,000 in income??
    Holy smokes Batman!

    • Anonymous says:

      Its net income.  Roughly (highly simplified) revenues minus expenses = net income. 200k of net income is still better than a loss.

      • Anonymous says:

        that measly sum  is too small for a bank.

        • KY says:

          but it’s far better than their Q1 loss of $176.3 million isn’t it

          I would say it was more of a worry that their "normalised" net income for Q2 was 2.2 million compared to 4.4 in Q1

          Frankly it’s not the end of the world or anything to panic about

    • Anonymous says:

      hell, I made that much!!