Butterfield reported higher net income and returns in 2022 as a rising interest rate environment contributed to the bank’s performance.
The bank’s net income last year was US$214 million compared to $162.7 million in 2021. The return on average common equity for the year increased to 25.7% from 16.8%.
Meanwhile Butterfield’s efficiency ratio, which divides a bank’s operating expenses by its income less credit provisions, improved to 59.2% compared with 65.9% a year earlier.
Butterfield’s chairman and chief executive officer, Michael Collins, said in a press release, “Butterfield’s results for the full year and fourth quarter of 2022 continued to demonstrate the Bank’s strong return profile, which benefited from rising market interest rates, non-interest income growth, and disciplined expense management that helped drive the efficiency ratio below 60%.”
Butterfield’s higher net income last year resulted from a $43.8 million increase in net interest income which was partially offset by higher deposit costs in the Channel Islands.
The bank’s non-interest income increased by $8.5 million increase due to volume-driven growth in both banking and foreign exchange revenue coupled with higher facility non-utilisation fees and a number of one-off corporate loan restructuring fees.
While Butterfield reduced its technology and communication costs by $7.1 million last year compared to 2021, staff costs were up by $4.9 million.
In addition, the bank had to increase its provision for credit losses by $5.5 due to the Cayman Islands government’s large, long-term credit facility, as well as decreasing macroeconomic forecasts that affect future expected credit losses.
Positive outlook
Collins maintained a positive outlook for 2023 stating that healthy returns on common equity will continue to support investor returns and overall growth objectives.
He said Butterfield would remain focused on limiting credit exposure in its conservative investment portfolio and seek to grow through targeted acquisitions.
Collins said the bank had made progress in preparing the onboarding of clients and colleagues from the recently acquired Credit Suisse trust business in Singapore, Guernsey and The Bahamas. The deal is expected to close this year.
The bank’s loan portfolio of $5.1 billion at the end of 2022 was $100 million lower than a year earlier, while total deposits of $13 billion as at 31 Dec. 2022 decreased by $900 million over the 12 months.
Butterfield’s total assets under administration for the trust and custody businesses were $106.2 billion and $32.2 billion, respectively, at the end of 2022, with assets under management at $5 billion. This compares with $106.4 billion, $36.8 billion and $5.5 billion, respectively, at the close of 2021.
Butterfield’s board has approved a new share repurchase programme of up to 3 million shares, with share buybacks planned for the first half of this year, if market conditions allow for it.
The board declared a quarterly dividend of $0.44 per common share to be paid on 14 March to shareholders of record on 27 Feb.
The bank’s total regulatory capital ratio at the end of 2022 was 24.1% as calculated under Basel III, compared to 21.2% in December 2021.
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