Butterfield begins recovery following ‘difficult’ year

(CNS): Butterfield Bank reported a profit on Tuesday for the first quarter net of 2011 compared to last year’s losses. After what bank officials described as a difficult 2010, this year is getting off to a much better start for the group with an income of $8.4 million compared to the net loss this time last year of $176.3 million. Brad Kopp, Butterfield’s President & Chief Executive Officer, said the bank was pleased to report the profit following a “difficult transitional year”, and said it pointed to the underlying strength of the bank given the challenging, low-interest rate economy in which it managed to make a profit.

During last year Butterfield raised $420 million of new capital from institutional investors and $130 million from a Rights Offering to existing shareholders, allowing management to proactively address the problems of underperforming assets—non-performing hospitality loans and asset-backed securities investments—that had hindered the company’s financial performance, it said. It sold most of the asset-backed securities in its investment portfolio and moved to restructure, settle or otherwise address non-performing assets in its credit portfolio made savings through managing expenses of 18.1% .

“Over the past twelve months we have concentrated our efforts on de-risking the balance sheet and rationalising our business model,” Kopp said. “We emerged from 2010 with a strong balance sheet, over $1 billion of capital, and an executive management team that is focused on developing our core businesses of community banking and wealth management. Although the protracted economic recovery and persistent low interest rates are challenging for the Bank, with our first quarter profit, we are already seeing the benefit of that restructuring and rationalisation.”

Brad Rowse, Chief Financial Officer explained that the sale in 2010 of securities gave the bank excess liquidity to invest in higher-yielding, low risk securities in the last quarter of the 2010. “We are beginning to see the benefit of that strategy and, despite the low-rate environment in which we are currently operating, our quarterly net interest income before provision for credit losses, at $51.4 million, was up over 20% year on year,” he said. “Non-interest income was down in Q1 2011 versus the same period in 2010 by 16.8% due principally to lower foreign exchange and asset management revenues, down 14.0% and 6.1%, respectively, which are reflective of current economic circumstances in our markets, as well as the comparative impact of non-recurring items that occurred last year.”

During the first quarter of 2011, Butterfield said it was selling its equity interest in fund administrator Butterfield Fulcrum as it was no longer considered by management to be a core business for the bank. The sale, officials added, is expected to close in the second quarter

The bank also noted that the Cayman operations successfully converted to the new technology platform over the past weekend and Bermuda is scheduled to convert late in the third quarter.

Wilton Dolloff, Executive Vice President and Chief Operating Officer, said the new systems will allow Butterfield to operate more efficiently, “The new systems will also allow for quicker delivery of new products to multiple markets and better online services,” he added.

The Board declared $4.0 million of dividends on the bank’s 8% Non-Cumulative Perpetual Limited Voting Preference Shares to be paid on 15 June 2011 to Preference shareholders of record on 1 June 2011. No common share dividend was declared.

See the full report below.