Butterfield reported lower net income of US$177.1 million, or $3.30 per share, for financial year 2019, down from $195.2 million and $3.50 per share in 2018, as the banking group integrated the acquisition of ABN AMRO’s banking business in the Channel Islands.
The full-year earnings translate into a 23.4% core return on average tangible common equity, compared to 25.6% in 2018.
The bank’s net interest margin of 2.86% was also down for the year, mainly due to the ABN Amro acquisition and the resulting change in Butterfield’s loan and deposit mix. However, the new business boosted the bank’s non-interest income from various banking-services fees.
Michael Collins, Butterfield’s chairman and chief executive officer, said 2019 was an important year for the bank in terms of operational and financial achievements. “We successfully acquired the ABN AMRO (Channel Islands) banking business, which significantly increased our presence in Guernsey. With a relatively small market share in the Channel Islands, we are now pursuing growth to complement and balance our profitable and well-established banking franchises in Bermuda and Cayman.”
He said with the acquisition, Butterfield now has a larger and more diversified balance sheet supported by investment-grade credit ratings from S&P, Moody’s and KBRA.
“It was a more challenging US dollar interest rate environment in the latter half of 2019 and we were able to achieve strong and stable core net income,” Collins added. “Continued share repurchases helped achieve a core net income per diluted share improvement of 5% and core return on average tangible common equity remained at industry-leading levels.”
Butterfield’s efforts to lower costs resulted in a core efficiency ratio – a measure of a bank’s overhead as a percentage of its revenue – of 62.2%. The banking group is supporting its key jurisdictions Bermuda, Cayman, the Channel Islands and the UK with lower-cost service centres in Halifax, Canada, and Mauritius.
“These efforts to moderate expense growth are particularly important in a lower interest rate environment and at a time when we are integrating a large acquisition,” Collins said in a call with analysts.
Butterfield’s loan book increased 27% last year, supported by the Channel Islands business, mortgages in Central London and new sovereign loans to the governments of Bermuda and the Cayman Islands.
Collins noted the bank is not likely to consider new acquisitions until the Channel Islands business is fully integrated in the latter part of 2020 or next year.
New branch in Camana Bay
Last week Butterfield opened its new banking centre at 1 Nexus Way in Camana Bay.
The new branch offers teller and ATM services, as well as a designated meeting space for consultations by appointment with Butterfield’s private banking, corporate banking, investment and lending-services teams. The centre will be open Monday through Friday from 9am to 4pm.
“Camana Bay is a fantastic location and a great start to the roll out of our updated Butterfield brand,” the chief executive said.
“We are confident that this investment will solidify and grow our retail and mid-market corporate banking market share in the Cayman Islands for years to come. Our investment in this new branch signals our confidence in Cayman and the desire to further enhance our offerings in this important market,” Collins added.