Butterfield Reports Second Quarter 2023 Results
The Bank of N.T. Butterfield & Son Limited announced financial results for the quarter ended June 30, 2023.
A spokesperson said, “Net income for the second quarter of 2023 was $61.0 million, or $1.22 per diluted common share, compared to net income of $62.2 million, or $1.24 per diluted common share, for the previous quarter and $49.1 million, or $0.99 per diluted common share, for the second quarter of 2022. Core net income1 for the second quarter of 2023 was $57.0 million, or $1.14 per diluted common share, compared to $62.2 million, or $1.24 per diluted common share, for the previous quarter and $50.2 million, or $1.01 per diluted common share, for the second quarter of 2022.
“The return on average common equity for the second quarter of 2023 was 25.9% compared to 28.0% for the previous quarter and 24.5% for the second quarter of 2022. The core return on average tangible common equity1 for the second quarter of 2023 was 26.3%, compared to 30.5% for the previous quarter and 27.8% for the second quarter of 2022. The efficiency ratio for the second quarter of 2023 was 57.6%, compared to 56.0% for the previous quarter and 61.0% for the second quarter of 2022. The core efficiency ratio1 for the second quarter of 2023 was 57.6% compared with 56.0% in the previous quarter and 60.2% for the second quarter of 2022.
Michael Collins, Butterfield’s Chairman and Chief Executive Officer, commented, “Butterfield reported a solid second quarter of 2023, as we delivered consistent quarter-over-quarter non-interest income and expense discipline, which partially offset lower net interest income. During the quarter, we were pleased to have Moody’s assign an A3 long-term deposit rating with a stable outlook to our Cayman subsidiary in addition to reaffirming our Group rating. This demonstrates the strength of our Cayman business model and ability to support the Cayman Islands market, which has benefited from steady economic growth, driven by resurgent tourism and a healthy financial services sector. In Bermuda, we successfully implemented the upgrade of our core banking system and online platform and inaugurated our new flagship retail banking center in Hamilton.
“As expected, we also completed the second closing of our planned acquisition of Credit Suisse trust assets. To date, 374 relationships representing $21.1 billion of AUA have now transferred to Butterfield, significantly expanding our footprint in Asia. Work is now under way on client due diligence for subsequent tranches, which will include residual relationships in Singapore and selected Credit Suisse trust relationships in Guernsey and The Bahamas.”
“Net income was down in the second quarter of 2023 versus the prior quarter primarily due to lower net interest income as a result of lower average interest-earning assets, higher deposit costs and accelerated amortization of $0.9 million of issuance costs related to the Bank’s early redemption of its 2018 issuance of subordinated debt.
“Net interest income [“NII”] for the second quarter of 2023 was $92.5 million, a decrease of $4.9 million, compared with NII of $97.4 million in the previous quarter and up $10.5 million from $82.0 million in the second quarter of 2022. NII decreased during the second quarter of 2023 compared to the prior quarter, primarily due to lower balance sheet volumes, increasing deposit costs and the early redemption of subordinated debt. Compared to the second quarter of 2022, NII improved due to higher yields on assets, which was partially offset by increased deposit costs.
“Net interest margin [“NIM”] for the second quarter of 2023 was 2.83%, a decrease of 5 basis points from 2.88% in the previous quarter and up 57 basis points from 2.26% in the second quarter of 2022. NIM in the second quarter of 2023 was lower than the prior quarter due to lower balance sheet volumes, increasing deposit costs and early redemption of subordinated debt, which was partially offset by increased yields on interest earning assets. Compared to second quarter of 2022, NIM improved primarily due to higher yields on treasury assets and loans, partially offset by increased deposit costs.
“Non-interest income for the second quarter of 2023 of $50.2 million was sequentially flat against the previous quarter and $1.7 million lower than $51.8 million in the second quarter of 2022. Non-interest income for the second quarter of 2023 was comprised of increased trust income driven by the onboarding of relationships acquired from Credit Suisse and higher activity-based revenues, offset by lower banking income, driven by reduced volumes, as well as lower other non-interest income driven by a decrease in equity pick-up on a portfolio investment. Non-interest income in the second quarter of 2023 was lower than the second quarter of 2022 primarily due to a lower level of unclaimed balances recognized into income, which was partially offset by higher revenues from asset management and trust activities.
“Non-interest expenses were $83.5 million in the second quarter of 2023, compared to $84.1 million in the previous quarter and $83.0 million in the second quarter of 2022. Core non-interest expenses1 of $83.6 million in the second quarter of 2023 were lower than the $84.1 million incurred in the previous quarter, primarily due to lower staff-related expenses, which were partially offset by higher technology and communications costs related to the Bank’s implementation of its core banking system upgrade in Bermuda. Core non-interest expenses1 in the second quarter of 2023 were higher than the $81.9 million incurred in the second quarter of 2022 due to inflationary increases in salaries and benefits, as well as the aforementioned increase in technology and communications costs.
“Period end deposit balances were $12.2 billion, a decrease of 6.2% compared to $13.0 billion at December 31, 2022, primarily due to deposit movement across all banking jurisdictions as customers activated their funds and sought higher yielding products, with the largest decrease in the Channel Islands. Average deposits were $12.2 billion in the quarter ended June 30, 2023, compared to $12.8 billion in the first quarter of 2023.
“The Bank maintained its balanced capital return policy. The Board again declared a quarterly dividend of $0.44 per common share to be paid on August 28, 2023 to shareholders of record on August 14, 2023. During the second quarter of 2023, the Butterfield repurchased 0.7 million common shares under the Bank’s share repurchase plan authorization.
“The current total regulatory capital ratio as at June 30, 2023 was 25.1% as calculated under Basel III, compared to 24.1% as at December 31, 2022. Both of these ratios remain significantly above the minimum Basel III regulatory requirements applicable to the Bank.“
