Butterfield Bank to acquire part of HSBC Cayman

Butterfield Bank has reached an agreement to acquire parts of the corporate and retail banking business of HSBC Bank in the Cayman Islands.

The approximate value of assets transferred from HSBC is US$800 million. HSBC’s total assets in Cayman are around US$1.4 billion. HSBC Cayman said the agreement to sell parts of its corporate and retail business in Cayman comes after a strategic review.

The transfer is expected to be completed in the fourth quarter of 2014 and represents further progress in the execution of HSBC Group strategy, HSBC said.

Butterfield Bank (Cayman) Ltd., a wholly owned subsidiary of Bermuda’s The Bank of N.T. Butterfield & Son Ltd., had more than US$2.3 billion in assets and employed 273 people on island at the end of 2013.

Brendan McDonagh, the bank’s chairman and chief executive officer, said with the acquisition, Butterfield will strengthen its community banking market presence.

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“This transaction strengthens our core business and market position in Cayman and is in keeping with our group strategy of deploying capital to business development in core markets and businesses in which we have the scale and expertise to drive long-term growth.”

Butterfield group pursues a strategy of growing shareholder value by expanding its share in the community and private banking markets, and leveraging its multi-jurisdictional trust, custody and asset management offering.

The bank expanded its trust and fiduciary services presence in Guernsey last year with the acquisition of Legis Group’s trust business. The diverse businesses of the group contribute to a comparatively high fee income as a share of revenue.

Last year the bank said it expects its investments in core banking systems and the introduction of mobile banking in Bermuda and Cayman to provide additional revenue, in addition to operational efficiencies.

Cayman is an important financial jurisdiction and a key domestic market for Butterfield, Mr. McDonagh said. “Over four decades, Butterfield has invested in the growth and development of the Bank in Cayman, and we are proud of our position as one of the largest community banks.”

Cayman contributed 24 percent to Butterfield’s group revenue, compared to 56 percent from Bermuda and 11 percent from Guernsey.

HSBC Cayman will commence wind-down preparations, including ceasing to undertake new business with immediate effect, and will look to minimize the impact on the remaining customers during this period, the bank said.

HSBC Bank Cayman’s CEO Jonathan Cooper said, “During this period of transition, the servicing of our clients and the smooth transition of our business to Butterfield Bank (Cayman) Limited together with ensuring the well-being of our Cayman staff are our top priorities.”

Conor O’Dea, Butterfield senior executive vice president and managing director in Cayman, said, “Butterfield is pleased to be in a position to accommodate HSBC’s customers in Cayman, and we welcome them to the bank. Our team is committed to ensuring that the transfer of business is seamless.”

In 2013, Butterfield focused on its expense management and pursued a share buy-back program. Core earnings for the group improved as a result by $21.7 million to $76.6 million. Total and tier 1 capital ratios stood at 23.7 percent and 19.6 percent, respectively.

In Cayman, Butterfield grew net income before gains and losses by $6.5 million to $25.9 million. The increase was mainly due to an improvement in loan and investment income, banking fees, foreign exchange and trust revenues, coupled with a reduction in salaries and technology expenses. Net income for the year was $25.4 million, an increase of $1.5 million from the prior year.

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  1. ‘HSBC Cayman said the agreement to sell parts of its corporate and retail business in Cayman comes after a strategic review.’
    It is my opinion that the winding down, including ceasing to undertake new business with immediate effect represents a failure of HSBC to achieve its initial objectives as it relates to their corporate and retail banking business in the Cayman Islands.
    What remains of HSBC Bank in the Cayman Islands and how will the staff be impacted by this decision?

  2. @ Mr Boland: HSBC thought it would come into retail banking in Cayman and make a killing only to find the established players were more resilient and weren’t going to be walked all over. What remains will service the international business (both the savoury and the increasingly in HSBC’s case if their ongoing issues with US regulators is taken as a yardstick) and staff will either be transferred to Butterfield or made redundant.
    @ Mr Davies: You think HSBC gives two cents for what you think? If you must choose a bank, choose one that is more customer focussed, approachable, caring and LOCAL.