Butterfield Bank Earnings Increase In 2015
The Bank of N.T. Butterfield & Son Limited today announced core earnings for 2015 of $113.9 million, an improvement of $7.5 million compared to $106.4 million earned in 2014.
The core cash earnings per share increased $0.03 to $0.20 per share. The core cash return on average tangible common equity improved to 18.4% in 2015, compared to 15.1% in 2014.
Reported net income for the year ended 31 December 2015 was $77.7 million [$0.12 per share on a fully diluted basis] compared to $108.2 million [$0.16 per share on a fully diluted basis] in 2014, down $30.5 million year over year.
Commenting on the Bank’s results, Michael Collins, Chief Executive Officer, said, “We are encouraged by improving economic conditions in all of our markets as evidenced by a 6% increase in deposits, core earnings of $113.9 million, and a core return on equity of 18.4%.
“Over the past few months, Butterfield implemented a number of changes that will position the Bank for stronger and increasingly predictable earnings going forward. We realised non-core charges, primarily in the fourth quarter, related to the exploration of a US stock exchange listing, management restructuring, US tax compliance remediation, and the planned wind down of our private banking business in the UK.
“Those items contributed to non-core charges of $36.2 million for the year, which significantly reduced our net income. Although there will be some additional non-core charges associated with these projects, our actions will deliver an improved core run rate throughout 2016 and beyond.
“We will focus resources on the markets in which we have a substantial presence and a long history of success. Building upon our recent acquisitions in Bermuda, Cayman, and Guernsey, we continue to strengthen our unique trust and wealth management platform.
“Our agreement to acquire the Private Banking Trust and Investment Management business of HSBC in Bermuda, a transaction which is expected to close in the second quarter of 2016, along with the planned wind down of our sub-scale private banking operation in London are manifestations of a strategy that will further contribute to improvements in the Bank’s run rate.
“The Board continues to evaluate the Bank’s capital allocation strategy with a view to maintaining conservative and prudent capital levels, whilst rewarding our shareholders for their investment in the Bank. In 2015, we were able to allocate significant capital to common and preference shareholders with dividends totalling $0.04 and $80 per share, respectively.
“We additionally repurchased $5 million of common shares for treasury and $120 million for cancellation from CIBC, a major shareholder, at a price of $1.50 per share. In order to preserve capital to enable the Bank to act upon beneficial opportunities, similar to the aforementioned acquisitions, the Board has decided to forego the declaration of a special dividend from 2015 earnings.
“However, over time, the integration of complementary, acquired businesses, the anticipated economic improvement in our core markets as well as implementing our capital financing strategy, should drive earnings growth that will enable us to progressively increase our cash dividend payments.
“Our leadership team is composed of financial professionals with extensive experience in community banking and wealth management. Barclay Simmons, a Bermudian who has served as a Director since 2011, assumed the Chairmanship of the Bank in October. Within the executive team, we welcomed Michael Schrum as CFO and Beth Bauman as Group Head of HR.
“Conor O’Dea, President and COO, will retire from his executive roles during the second quarter of 2016. He will become Chairman of the Board of our Cayman Bank, and will stand for election to the Butterfield Group Board at the AGM on 26 April 2016.
“Butterfield’s progress in 2015 was recognised through a number of industry accolades, including The Banker’s Bank of the Year awards in Bermuda and Cayman, and Private Bank of the Year in Bermuda.
“Butterfield Trust was named Trust Company of the Year at the prestigious STEP Private Client awards, underlining Butterfield’s leading position in the global trust industry. We were also proud to be named an Official Supplier and the Official Bermuda Bank of the 35th America’s Cup to be held in Bermuda in 2017.
“I look forward to working with the Board and our senior management team as we continue to build upon the successes of 2015.”
Michael Schrum, Chief Financial Officer said, “Butterfield performed well in 2015, realising improvements in asset quality, non-interest income and operating efficiency.
“Non-interest income rose by $5.4 million year on year, due to the first full-year impact of the mid-2014 Legis acquisition in Guernsey, along with increased foreign exchange transaction volumes, and the receipt of placement fees earned from the rollout of a private equity investment product.
“Core expenses were down by $2.1 million reflecting strict cost discipline. The quality of the Bank’s loan portfolio continued to strengthen, with provisions for credit losses down to $5.7 million from $8.0 million in 2014.
“Net interest income before provision for credit losses was relatively flat on 2014 at $239 million, owing to a decrease in the size of the loan portfolio and associated interest income, offset by an increase in interest earned on our investment portfolio, which we grew during the year against a backdrop of low demand for loans.
“We restructured the investment portfolio during the year, weighting it more heavily in shorter duration securities, bringing our portfolio duration down to around 3.5 years.
“This enables us to improve performance during market volatility and the Bank will benefit from anticipated increases in interest rates in 2016 and beyond. That restructuring resulted in higher cash balances and lower yields on the portfolio in 2015, and a decrease in the Bank’s net interest margin by 0.26% versus 2014.
“The increase in December 2015 to the benchmark US dollar interest rate with possible further rate increases will benefit the Bank, and we are well positioned to improve net interest margins in a rising rate environment. We also expect increasing loan demand associated with continuing economic recovery in our key markets.”
I think that is absolutely wonderful that the banks are doing well, very encouraging to say the least, that goes to prove that the recession is long time over and we can all look forward to a 4 day work week.
When Bermuda business, example banks and insurance companies do well it opens the door for us to move forward or is it moving forward.
Bermuda has experiences the trauma of sever recessions in the past , the public, back then never feel the brunt of it, because it was the Banks that took care of their customers.