Butterfield’s quarterly net income declines

Butterfield Bank’s net income decreased to $30.5 million in the third quarter of 2020, from $34.3 million the previous quarter, while core net income increased during July to September over the previous three months.

Butterfield CEO Michael Collins

Michael Collins, Butterfield’s chairman and chief executive officer said “the bank performed well” during the third quarter “as we focused on managing our credit exposures and reducing costs to help offset the revenue impact from lower volumes and interest rates during the pandemic”.

Compared to third-quarter 2019 net income of $42.4 million, this figure decreased over the same period in 2020 by $11.9 million.

Core net income for the third quarter was $36.5 million, compared to $34.4 million in the second quarter 2020, and $48.8 million for the third quarter of 2019.

In a press release, Collins said Butterfield had decreased expenses through a cost-reduction programme, which included voluntary separations and redundancies.

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“The cost reduction programme increased non-core exit costs this quarter but is expected to lower expenses in 2021 and beyond,” he said. “In addition, we will continue to provide operational support roles in Butterfield’s service center in Canada for non-client facing positions.”

He noted that mortgage deferrals offered to clients in Bermuda and Cayman have now come to an end, but the bank would continue to work with clients on an individual basis.

“We are closely monitoring our loan book and proactively communicating with clients to assess their capacity to resume normal payments,” Collins said.

The group’s net income decreased by $3.8 million in the third quarter of 2020 compared to the prior quarter mainly as a result of staff exit costs associated with voluntary separation agreements and redundancies.

On a core basis, net income improved by $2.1 million over the previous quarter, when COVID-19-related lockdown measures resulted in lower banking fees.

Lower global interest rates affected Butterfield’s $75.3 million net interest income in the third quarter. This was $3.8 million lower than in the previous quarter and down $11 million from the third quarter of 2019.

Continued low market rates across the yield curve and currencies, which impacted interest earning assets and, to a lesser extent, deposit pricing, lowered the bank’s net interest margin in the quarter to 2.30%. This is 18 basis points lower than in the second quarter of 2020 and a decrease of 22 basis points compared to same period last year.

Butterfield said in addition, the bank incurred higher interest costs due to a timing gap between the issuance of new subordinated debt in the second quarter and the planned redemption of existing tranches in the second half of 2020.

The group’s non-interest income increased to $46.9 million, compared with $41.7 million in the lockdown-impacted second quarter and $46.6 million in the third quarter of 2019. The third-quarter 2020 non-interest income also benefitted from non-recurring loan commitment fee revenue of $1.5 million.

Non-interest expenses of $91.3 million in the quarter compared with $82 million in the previous quarter and $90.4 million in the same period last year. This increase was mainly due to voluntary separation and early retirement programmes, as well as redundancies.

Butterfield’s board declared a quarterly dividend of $0.44 per common share to be paid on 30 Nov. to shareholders of record on 12 Nov.

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