Butterfield: Rumours are untrue

(CNS): Butterfield Bank (Cayman) Managing Director Conor O’Dea  today sought to dispel rumours that the bank was in financial trouble, which he described as “unfortunate and unsubstantiated”. He said these rumours had been circulating since last Friday when the parent bank announced the audited financial results for the year end at December 2008, together with news of a $200 million capital raise guaranteed by the Bermuda government. “Since that time some of the reporting has not brought clarity as to the financial condition of Butterfield,” O’Dea added.

Referring to a headline story in Thursday’s edition of The Caymanian Compass, O’Dea said the tone of the reporting was headline-grabbing and misleading, and he wanted to get the facts out correctly and unemotionally. The article mixed information about Butterfield Group and Butterfield Bank (Cayman), which was confusing, he said. Furthermore, he noted, the Cayman bank was not a branch of the parent company, as suggested in the article.

He said some people had been taking rumours that the bank was in trouble at face value, but the facts were being misenterpreted. He pointed out, “Most banks are relying on governments to provide debt or equity funding to ensure they meet their regulatory capital ratios. In the case of Butterfield we comfortably meet the regulatory capital ratios as a Group and in every jurisdiction in which we operate. The $200 million of new capital is therefore truly to protect against the future impact of the global economic recession.”

He said that rumours, both here and in Bermuda, had led to people withdrawing funds from Butterfield. In fact, in Bermuda one ATM machine had no cash left in it. However, at Butterfield (Cayman), withdrawal of funds had been matched by deposits.

“Since last Friday morning’s announcements, and despite the unsubstantiated rumours, our banking customers have remained loyal and supportive. We cannot deny that some customers have diversified their risk and reduced balances. However, other customers have increased their balances, resulting in net customer banking deposits remaining static up to close of business overall,” O’Dea stated.

O’Dea said, “While I understand the nervousness of the Cayman community in these difficult economic times, at such a time it is important to ensure that you have the facts because right now we are a typical bank in an untypical economic environment. We have remained conservative, prudent and our parent bank’s actions in raising the additional capital is to provide against future impacts of the deepening global economic recession. It creates a level of robustness for our customers and the communities in which we operate as well as helping to sustain shareholder value.”

O’Dea said considerable information had been provided by Butterfield to its customers, shareholders and the community, including a press release last Friday detailing the Standard & Poors rating agency’s assessment of the Bank, which has Butterfield on an A-rating, an independent endorsement of the strength of Butterfield’s financial position.
Over the last year many household name banks have sought capital in the capital markets with varying degrees of success but since the failure of US investment firm Lehman Bros in September 2008, numerous banks around the world have had to rely on government funding, either in the form of debt or equity.

Speaking to the strong growth of the Bank over the last few years O’Dea said the bank had remained true to their prudent management of the Bank and the outstanding focus on customer service, with total assets of Butterfield Cayman $3.3 billion up 22% year over year. Noting the conservative nature of the Bank in Cayman, he said that 67 cents of every dollar of customer deposits are held in cash or cash equivalents with only 16 cents of every dollar being lent out to customers.

Despite global economic conditions and the early outflows of the recession that are beginning to be felt in Cayman, O’Dea said he believed the conservative practices, not only of Butterfield, but of the banking community in Cayman when compared to the practices of US and European banks over the last ten years, would stand the Cayman economy in good stead as the country deals with the impact of the global recession.

O’Dea added, “We remain strong and committed to our customers with their full support. The investments that we have made in the last three years allied to significant investments being made in new banking systems will ensure that we become increasingly competitive not only in the local market place but ion all the jurisdiction in which we operate. While we acknowledge that the recession creates challenges not only for the bank but for our customers we will be working to help our customers deal with their personal financial challenges.”