Industry troubles reflected in Butterfield results
(CNS): Butterfield announced a third quarter net loss of $18.6 million on Wednesday compared to net income of $0.2 million for the second quarter of 2010 and net income of $7.0 million in the third quarter of 2009. Brad Rowse, the Executive Vice President & Chief Financial Officer said that while the financial markets have stabilised in 2010, banks continue to face difficult conditions. In Cayman the bank reported net income before gains and losses of $2.4 million for Q3 2010, $ 1.1 million below Q3 2009 due to lower interest income earned and increased IT outsourcing costs. In the wake of the announcement of the losses the bank’s president said Butterfield remained focused on reducing risk, returning to profitability and delivering sustainable growth for shareholders. (Photo Dennie WarrenJr)
“That focus entails concentrating our financial and management resources in jurisdictions where we have a meaningful market presence and a depth of local market knowledge,” Brad Kopp said. The Bank sold its trust, wealth management and advisory businesses in Hong Kong and its trust operation in Malta in September with a resultant net loss of $7.4 million. “Additionally, continued weakness over the summer months in the hospitality industry has led us to provide a further $14.2 million of specific allowances for related loan exposures. Although we are not happy to be taking additional provisions, we do believe that we are positioned to see the cycle through.”
Rowse said that Butterfield was reviewing all aspects of its business against a backdrop of global uncertainty to ensure the right balance between current profitability and future growth. “The Bank is well positioned with a strong capital base and remains focused on the two pillars of our business, community banking and wealth management,” he said.
Michael Collins, Senior Executive Vice President in Bermuda said that islands economy continues to reflect the weakness of tourism and international business and the effects of an unprecedented global recession. “We are well positioned for an economic recovery as transaction activity has actually increased over the past year and deposit volumesare stable,” he said. “However, demand in the hotel and retail sectors has fallen considerably, and we have to accept that tourism is gradually transitioning to a more sustainable business model in order to recover the inherent value in Bermuda’s tourism product. In the first nine months of 2010, we have taken $19.7 million in credit provisions for our hotel loans and will continue to manage these exposures conservatively as we complete the de-risking of our balance sheet.”
Excluding the $0.3 million gain in the prior year, in the Cayman Islands total revenues of $15.3 million were $0.7 million below Q3 2009 results primarily due to decreased interest income and lower FX commissions,” bank officials said.
Net interest income before loan loss provisions was $0.6 million below prior year levels due to low inter-bank interest rates on lower client volumes.
Non-interest income of $8.1 million in Q3 2010 was down $0.2 million (3.0%) on Q3 2009 resulting from increased Banking commissions offset by reduced volumes in foreign exchange commissions and the completion of its transitional services agreement with its former subsidiary Butterfield Fulcrum Group (Cayman) Limited in Q3 2009.
Total assets at the end of Q3 2010 were $1.9 billion down $666 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 $32.6 million over twelve months, with growth in both the personal lending and commercial loan portfolios and prudent loan loss provisioning.
Client assets under administration ended Q3 2010 at $4.5 billion representing a decrease of $573 million from Q3 2009, fee earning assets under management of $ 885 million, increased 7.1% over Q3 2009, reflecting gradual recovery in the financial asset markets.
Category: Business
That rights offering was fully subscribed in May (http://www.bm.butterfieldgroup.com/News/Home.htm?Name=Butterfield%20130%20Million%20Rights%20Offering%20Oversubscribed&Year=2010), meaning CIBC and Carlyle each own less than a quarter of Butterfield’s shares and neither has a controlling interest in the Bank.
"According to Butterfield’s press release". Well, according to Butterfield’s press release, they are well capitalized and well positioned – thing is, that’s the same thing they said only a few weeks before they posted the $214M loss in March. If they had not sold off almost 70% of the company at that time, they would be gone already, and would have closed the doors! They’re not going publish a press release saying ‘the boat is sinking and we’re all going to drown!’
The facts are all over the article (unless CNS and the bank are making the numbers up!);
– LOSS of $18.6M (after a write-down of $214M in March)
– sold Malta and Hong Kong at a LOSS of $7.4M
– continued weakness led us to provide a further $14.2 million of specific allowances for related loan exposures (LOSSES)
– In the first nine months of 2010, we have taken $19.7 million in credit provisions for our hotel loans (Bermuda) and will continue to manage these exposures conservatively as we complete the de-risking of our balance sheet (LOSSES)
– Total assets at the end of Q3 2010 were $1.9 billion down $666 million (-21%) from year end 2009
– Client assets under administration ended Q3 2010 at $4.5 billion representing a decrease of $573 million (-12%) from Q3 2009
The news has a responsibility to report this stuff and give people a chance to decide for themselves.
Hey I have a mortgage, car loan, two credit cards and all my business accounts at Butterfield Bank. A capital injection means they have been injected with a large sum of money (500 million). Look at all of the quarterly reports from local banks and they are just as bad or worse without the capital injection. Please stop thinking with your bunkies and leave BF alone!
Hey guys,
You are messing with my money now because your causing chaos by spreading dumb @ss rumours about BF closing its doors. What will close the doors at BF is panic, and then all the smart people at BF will come to get your jobs because they won’t have theirs!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Read earlier news; Butterfield has outsourced it’s IT operations (core of any bank) overseas. Butterfield has bailed out on Cayman to line their own pockets. Outsourcing could be the final poison that wrecks our economy, we need to keep Caymaian jobs here in Cayman, not outsourcing them overseas to provide more money to a parent company in another country.
Stop panicking people and causing unnecessary unrest within the community! Butterfield is solid with over 300 employees, major investments in technology and systems upgrades and they continue to invest over $250,000 each year to local charities.
"Panic and take our money out"?
We did that already when McBush threatened to impose a money transfer tax. Every red cent left the island fast enough to leave a vapour trail, which surely McBush knew would happen. CIBC recapitalized Butterfield ("bailed them out") so they survived, but it’s interesting to note that McBush can bring a bank to the brink of collapse just by shooting off his mouth once. Now that’s real power!
I am not worried, Butterfieldhave proven worthy of good investment to the tune of $550m. Our money is safe & the staff I know there are confident in their jobs & happy be working for such an honest institution!
Facts are it is well capitalised and highly liquid.
Doesn’t sound like a death nell to me.
They are already partly owned by CIBC (22.5%), hopefully Butterfield will just be rebranded as First Caribbean (and we don’t lose all our savings).
Jon
Butterfields is now effectively owned and controlled by CIBC ( with a minority interest owned by the Carlyle Group), the same Canadian bank as currently owns and controls FirstCaribbean Bank. The long-term dots could be joined….
I apologise and stand corrected. CIBC currently owns a minority interest in Butterfields.
Sales Pitch. We are a crime free destination, world class financial centre, friendly people and offer excellent real estate investments.
Facts.
Down:
Butterfield Bank.
The Westin.
Real Estate.
Population (10,000 people supposedly have left)
Up.
Crime.
All this stems from an anti-business, crab in the bucket, mindset.
Addition to UPs:
CCTV
Helicopter
$185 Mil Loan from Cohen & Co
Premier’s fence
Unemployed Caymanians and their anger
Customer service at Butterfield Cayman is definitely at an all time low. I understand they have temps dealing with customers while everyone else has been forced to divert their attention to the computer changes/problems. Add that to their financial woes and it’s difficult to remain a faithful customer, even after 25 years.
All the other banks are recovering; the reason Butterfield is still experiencing problems is their IT outsourcing (that will cost over $400M), and the attempt to move all IT services to Canada. This has cost Cayman jobs, and will continue to do so (Canadian data center and US/India support teams), as well as provide poor service to local Caymanian customers. The US has been dealing with a huge loss of IT jobs (going to India), and it is not working out very well for them – lets not have Cayman follow the same misguided path. Bring the jobs back to Cayman!
"All the other banks ar recovering;". Really? Where do you see those results?
All the US banks are posting profits, CNB posted profits, FCB posted profits, HSBC posted profits (not sure about Scotia or RBC, but we could check). Simply visit their websites, all this information is public, and gets posted in the papers (as does Butterfield’s continued losses). The only reason Butterfield posted a $200,000 profit in quarter 2 was due to salary savings thanks to all the staff that have left. If you know anyone in the bank, you’ll notice that every department that has access to the books (finance, investments, audit) has seen a dramatic loss of staff. They haven’t replaced most of those positions, and they still posted an $18,600,000 loss for quarter 3 – ouch! Add in the $214,000,000 loss posted in March, and the outlook is not good ($214,000,000 loss +$200,000 profit + $18,600,00 loss = $232,400,000 loss so far this year). Share price has dropped to ~$1.41 (from over $20 just a few years ago) AND has been wiped out due to the new ‘preference shares’. I closed my account yesterday.
The third sentence of the article states that Butterfield(Cayman) also posted a 3rd quarter profit and I doubt very much that it is only due to the loss of a few staff. In fact it would seem to me that the staff numbers are actually up due to the local temporary staff that have been hired. The stated loss appears to be related to specific (Group) debts which are being taken care of.
I’m happy to be a customer and I’m sure that you will be welcomed back is due course.
I’m sure they will miss you.
Where did you read about the IT outsourcing? I don’t see it in this article.
Could it be that Butterfield has rapidly sunk to the lowest level of customer service and they no longer CARE about their customers or if they leave??? They don’t even care about their staff – look at the recent turnover – that should sound serious alarm bells for all…
A few years ago, had need to transfer a fairly large sum of money out for a legitimate business transaction. I got calls from several managers asking if I was satisfied and if my account was OK.
Recently I transferred over 5X that amount out SOLELY because I was pi$$ed off at their lack of customer support and concerns for client’s well being, and a concern for what that would do to the bank in the long term. Did they even ask why???
NO!!!!!
I take that as a resounding confirmation that I made the right call – this bank is going down.
Trust me – if it does survive, it will be under a new name with a new owner.
RIP BOB…
Sweetheart, you are a PPM.