KBRA Assigns Ratings To Bank Of Butterfield

July 19, 2019 | 0 Comments

Kroll Bond Rating Agency [KBRA] has KBRA has assigned the Bank of N.T. Butterfield & Son Limited a senior unsecured debt and deposit ratings of A+, a subordinated debt rating of A, and short-term debt and deposit ratings of K1.

The ratings agency said, “Kroll Bond Rating Agency [KBRA] assigns senior unsecured debt and deposit ratings of A+, a subordinated debt rating of A, and short-term debt and deposit ratings of K1 for Hamilton, Bermuda based The Bank of N.T. Butterfield & Son Limited [NYSE: NTB]. The Outlook for all long-term ratings is Stable.

“The ratings for NTB are underpinned by its strong financial profile, which is characterized by a liquid and high-quality balance sheet, low cost of funds, and highly diversified revenue stream. Approximately 60% of total assets are either in the form of cash & short-term investments or highly rated investment securities, backed explicitly by the U.S. government.

“Deposits, along with equity capital, almost fully fund assets [96%]; the deposit base, while lumpy and periodically prone to large outflows connected to business conditions in and outside of Bermuda, is low cost [0.38% at 1Q 2019], and generally insensitive to interest rate movements. KBRA views favorably the magnitude of on-balance sheet asset liquidity in the event the sensitivity or volatility of the deposit base were to change. Fee income continues to account for about one-third of total revenues, providing NTB with substantial earnings diversity and performance differentiation [compared to the KBRA rated universe]. Fee revenues are broad-based and largely uncorrelated to the loan and investment portfolios, which KBRA views positively.

“These factors collectively help sustain the bank’s high risk-adjusted returns and capitalization and solidly position the bank in the high single A rating band. KBRA acknowledges that NTB operates in smaller, more economically concentrated markets without central bank existence and that it has occasionally been the subject of governmental inquiries as a result of its presence as an offshore financial intermediary domiciled or otherwise doing business in very low tax jurisdictions. The revenue diversity, in KBRA’s assessment, counters some of the economic and geographical limitations. In addition, KBRA views the bank’s policies and practices connected to the various forms of operational risk as robust.”

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