Butterfield has entered into a definitive agreement to acquire the Channel Islands-based banking business of ABN AMRO Bank N.V. through its wholly owned subsidiary Butterfield Bank (Guernsey) Limited. The aggregate purchase price for ABN AMRO (Channel Islands) Limited is approximately US$208 million, subject to certain purchase price adjustments.
With the acquisition, Butterfield will significantly expand its presence in Guernsey and Jersey. For ABN AMRO Channel Islands, the transaction will bring the benefits of a more extensive loan product offering, as well as the opportunity to extend its service offering to the private equity and insurance industries, Butterfield said in a press release.
Michael Collins, Butterfield’s chairman and chief executive officer, said, “In ABN AMRO Channel Islands, we have found an ideal partner through which to expand our core Channel Islands banking business. This acquisition is another important step in our strategy to grow through acquisitions in the highest quality offshore markets where we have scale and expertise.”
Collins said the expansion in the Channel Islands showed the importance of the two jurisdictions to multinational clients.
ABN AMRO’s Channel Islands operations have a similar conservative risk management culture and will contribute both management talent and sales expertise to the combined business, he added.
The bank’s business and employees will be integrated with the existing Butterfield Guernsey operations and operate under the Butterfield name, once the transaction closes.
ABN AMRO has been in the Channel Islands for 35 years and offers banking, investment management and custody products to three trusts, private clients and funds. The bank has about £2.9 billion in deposits and £3.5 billion in assets under management and custody.
“This significant acquisition is a Channel Islands banking business similar to our existing banks in Guernsey, Jersey, Cayman and Bermuda,” Collins said. It is also an opportunity for Butterfield to grow and gain market share in the Channel Islands, he noted.
The transaction is anticipated to close during the third quarter 2019, subject to regulatory and other customary closing conditions.
During the first quarter of 2019, Butterfield completed the onboarding of Deutsche Bank clients in the Channel Islands, following the acquisition of Deutsche Bank’s banking and custody business in the Cayman Islands, Jersey and Guernsey last year.
Deposits from the Deutsche Bank transaction have increased Butterfield’s net interest income, but also lowered margins, due to short behavioural maturity, higher deposit cost and the currency mix of those customer deposits.
Butterfield’s first quarter results for 2019 showed a net income of $52.1 million compared to $50.9 million for the previous quarter and $44.2 million in the first quarter of 2018.
Net interest income for the first quarter of 2019 was $88.0 million, an increase of $0.6 million over the previous quarter and an increase of $8.1 million over the first quarter of 2018.
The net interest margin for the first quarter of 2019 was 3.31%, a decrease of 7 basis point from the previous quarter and up 26 basis points from the first quarter of 2018.
Butterfield’s CEO described the results as solid, underpinned by a capital-efficient fee business, well-positioned balance sheet and focussed cost management.
He said the bank would meet the challenges of the current interest rate environment through expense control and disciplined capital management.
Butterfield’s first quarter non-interest income of $43.4 million was slightly lower than in the fourth quarter of 2018 ($45.7 million) mainly because seasonally fluctuating banking fees were lower as well as lower trust activity-based fees during this quarter.
Core non-interest expenses, on the other hand, also dropped to $80.3 million in the first quarter from $83.2 million in the final quarter of 2018 as a result of the releases of unused bonus compensation and the timing of employee transfers from Deutsche Bank.
Average deposit balances in the first quarter of 2019 of $9.8 billion were up from $9.1 billion in the previous quarter and flat at $9.8 billion in the first quarter of 2018, driven by customer deposit balance increases in the Channel Islands, as well as some significant transitory Bermuda customer deposit inflows.
In the Cayman Islands the bank lowered its property expenses by $0.7 million related to a lease commitment.
Commenting on the first quarter results, Michael McWatt, Butterfield Cayman’s managing director said: “I am encouraged by the continued growth of the Cayman business and strong contributions to our Group results in the first quarter. The acquisition of the banking book from Deutsche Bank has been fully integrated and is performing well.”