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Butterfield Bank (BSX:BUTTERFIELD) |
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WIKI ANALYSIS
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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