Butterfield Bank (BSX:BUTTERFIELD)

QUOTE AND NEWS
Wall Street Journal  Feb 9  Comment 
Two fund industry executives have partnered with private-equity firm BV Investment Partners to acquire fund administrator Butterfield Fulcrum Group.
Banking Business Review  Mar 2  Comment 
In a deal that expands its footprint in the Caribbean region, Canadian Imperial Bank of Commerce (CIBC) has acquired a 22.5% stake in Bermuda-based Bank of NT Butterfield & Son.




 
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Butterfield Bank Group (NTB:BH) is a diversified provider of financial services with headquarters in Bermuda, and operations in six other jurisdictions. The bank’s 2006 revenues can be deconstructed geographically and operationally as follows:

Revenue by Location Revenue by Segment
Bermuda 54% Net Interest Income 52%
Cayman 23% Investment & Pension Admin. 11%
Guernsey 11% Banking Services 10%
UK 7% Asset Management 8%
Barbados 3% Foreign Exchange 8%
Bahamas 2% Trust & Investment Services 8%
Other 3%

In their latest financial release (06/30/07), Butterfield reported total assets of $12.0 billion, assets under management of $11.7 billion, and assets under administration of $137 billion.[1]

2006 Results

Butterfield enjoyed another record year in 2006, with net income climbing 22.6% year-on-year to $134 million and revenue growing 16.9% to $415 million. Net interest income before provisions increased 17.7% to $218 million on the back of a healthy growth in customer deposits, which rose 22.7%, or $1.8 billion, to $9.8 billion. The bank’s investment and loan portfolios were up year-on-year by 30% and 22% respectively, with each standing at $3.8 billion as of fiscal year-end.[2] Butterfield’s capital structure remains strong, as evidenced by a highly liquid balance sheet and risk-weighted capital ratios that are well above the minimum requirements mandated by the Bermuda Monetary Authority.[3]

Half-Year 2007 Results

Bank of Butterfield recently reported 2nd quarter earnings of $35.9 million, up only 6.1% from the same quarter last year. This brings half-year diluted earnings per share (pre the 3:1 stock split) to $2.46 for fiscal 2007 versus $2.31 for 2006, a gain of 6.5% year-on-year. Net interest income for the quarter grew a healthy 15% to $61.6 million on customer deposits of $10.6 billion, which rose nearly 20%. The recent slowdown in earnings growth can be attributed to three main factors:

  • The bank undertook a number of acquisitions from 2001 to 2004, the benefits of which have been recognized handsomely over the past two years. The lack of recent acquisitions has made double-digit rates of revenue and earnings growth more difficult to sustain.
  • An increase in Butterfield’s headcount required to support its rapid growth, especially increased staffing in “corporate governance” areas such as Risk Management and Compliance.
  • It is common for expense growth to lag behind strong revenue growth.
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