Bank of Butterfield announced its core earnings for the full year 2012 of $54.9 million were up 45.2 per cent compared to $37.8 million a year ago. Net income for the year dropped from $40.5 million in 2011 to $25.6 million due to one-time items that generated a net loss of $29.3 million.
Brendan McDonagh, Butterfield’s chairman and chief executive officer, said the bank had made solid progress, by selling non-core holdings, streamlining and coordinating operations across jurisdictions, focusing on effective expense management and instituting a share buy-back programme.
As a result core earnings had improved and build on the bank’s capital position with total and tier 1 capital ratios of 24.2 per cent and 18.5 per cent, respectively.
“The board continues to monitor capital levels, maintaining a conservative capital management philosophy such that Butterfield remains well capitalised,” Mr. McDonagh said.
Based on the results, Butterfield declared a special dividend of $0.04 per common and contingent value convertible preference share to be paid on 22 March, 2013, to shareholders of record on 5 March, 2013.
“On a going-forward basis, the board will continue to assess capital planning options and declare dividends as warranted subject to regulatory approval,” he noted.
The tangible book value per share grew 10.5 per cent to end the year at $1.16 per share, compared to $1.05 per share in 2011.
The core cash return on tangible common equity increased from 3.8 per cent in 2011 to 6.6 per cent in 2012. Despite the improvement, the core cash return “remains below acceptable levels,” Mr. McDonagh said, adding it was “partially a reflection of the continuing economic challenges in our largest markets”.
Butterfield’s efficiency ratio, a measure of the bank’s overheads as a percentage of revenue, improved from 84 per cent in 2011 to 79 per cent in 2012. Brad Rowse, Butterfield’s chief financial officer, ascribed the improvement to the bank’s asset and liability management strategy, increased revenue from loan growth in Butterfield’s European franchise and expense management across the group.
Non-interest expenses decreased by $12.4 million, or 4.3 per cent, to $274.2 million from $286.6 million in 2011, primarily as a result of lower salaries and employee benefits following a headcount reduction of 60 and less overtime. Property costs declined by $1 million. Professional and outside services expenses decreased by $3 million from the reduction in the use of consultants and other expense management initiatives.
However, overall non-interest income also declined by $3.9 million to $128.5 million. Butterfield’s banking services revenue of $33.7 million was up $2.1 million, while the foreign exchange revenue of $26.5 million for the year was down $3.8 million and custody and other administrative services revenues declined by $1.7 million to $10.7 million.
Non-performing loans, which includes non-accrual loans and accruing loans past due by 90 days or more, totalled $141.8 million as at 31 December 2012, up $13.2 million from the prior year. Butterfield noted the increase was primarily due to non-performing residential mortgages, which increased by $17.5 million.
The volume of non-performing commercial loans, in contrast was lower by $5.9 million than a year earlier.
Cayman Islands
In the Cayman Islands, net income before gains and losses more than doubled to $19.5 million from $9 million a year earlier. Butterfield said the increases reflected a $7.3 million jump in net interest income to $44.6 million driven primarily by the increase in investment income, as well as a reduction of $2.7 million in provisions for credit losses.
Net income increased by $13 million to $24 million in 2012. Total assets at 31 December, 2012, were $2.1 billion, up $0.1 billion from year-end 2011, reflecting higher corporate client deposit levels. Net loans decreased by $16.5 million from year-end 2011, following significant principal repayments primarily on residential mortgages.
Client assets under administration for the trust and custody businesses were $1.7 billion and $1.4 billion, respectively, while assets under management declined by $0.2 billion to $0.8 billion.
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