Butterfield reports second quarter profit

Butterfield Bank has announced core earnings for the second quarter of $32.1 million, an improvement of $4.3 million compared to $27.8 million earned in the same quarter a year ago.

The core earnings per share increased $0.01 to $0.06 per share. The core return on average tangible common equity improved to 20.1 percent in the second quarter of 2016, compared to 17.6 percent in the second quarter of 2015, the bank said in a press release.

Return on assets at 1.1 percent was up 0.1 percent from Q2 2015. Reported net income for the second quarter was $29.8 million, compared to $23.3 million in the same quarter a year ago, up $6.5 million.

Butterfield CEO Michael Collins said in the press release, “Complementing organic growth in our key businesses, we continue to see the positive financial impact of acquisitions that have expanded our trust and wealth management platform in our core markets of Bermuda, Cayman and Guernsey, where we understand the environment and can build economies of scale.

“As we focus on jurisdictions in which we have significant market share, Butterfield also accelerated the wind down of our London-based private bank, which is now nearing completion. The bank will maintain a residential property lending business in the U.K., but our deposit taking and investment management businesses will be discontinued in line with previously communicated plans.”

During the quarter, he said, Butterfield repurchased $1.2 million worth of common shares, and the board declared common dividends of $0.01 per share from second-quarter earnings.

“It is pleasing to see that industry analysts and peers have taken note of our progress in recent weeks,” he said.

Standard & Poor’s affirmed the bank’s credit ratings, he said, while upgrading its outlook for the bank from stable to positive earlier this month. Industry publication eprivateclient named Butterfield to its Top 25 trust companies listing earlier this summer, and Citywealth has short-listed Butterfield for nomination as Trust Company of the Year in Guernsey, Switzerland and the Caribbean, and as Private Bank of the Year in the Channel Islands.

Mr. Collins also noted that during the quarter, Butterfield welcomed James Burr as a returning, non-executive director and a representative for The Carlyle Group, the bank’s largest shareholder.

“Jim was closely involved in Butterfield’s recapitalization in 2010 and has a deep understanding of the bank’s businesses and markets,” Mr. Collins said.

Olivier Sarkozy, who served as a non-executive director and a Carlyle representative on the board since 2012, has stepped down, he said.

Michael Schrum, Butterfield’s chief financial officer, noted Butterfield’s performance in the second quarter, saying, “Against a backdrop of limited economic expansion in our core markets and low interest rates, the bank generated year-on-year core earnings growth, inclusive of earnings from acquired businesses, of over 15 percent. Recent acquisitions have improved our capacity to generate non-interest income, as improved margins drove improvements in net interest income, and we continue to exercise careful management of operating costs.

He noted the bank’s acquisition of the private banking trust and investment management business of HSBC Bermuda in April, which contributed to a $1.6 billion increase in Bermuda deposits and generated additional fee and commission-based revenue. Adjustments and improved alignment of the bank’s fees to various banking services also contributed to growth in non-interest income during the quarter, he said.

Across the Group, non-interest income for the quarter improved by $3.4 million year over year.