Butterfield reported second quarter net income of US$49.1 million, up from $44.4 million in the previous quarter and $39.6 million a year ago.
Zack’s Equity Research reported the per share earnings of $1.01 beat its consensus estimates of $0.92.
Revenues of $133.78 million for the quarter ending in June were also a higher than expected and compared with $123.54 million during the same period last year.
Michael Collins, Butterfield’s chairman and CEO said in a press release the banking group was able to build on first quarter momentum “with continued strong results” and “robust” revenue generation in both interest and non-interest income.
“As anticipated, non-core commercial deposits have moderated due to client investment of cash and the strong US dollar impact on foreign currency deposits. As overall deposit levels normalise further, we expect the bank to return to an organic deposit growth rate of low single digit percentages annually,” Collins said. “Our net interest margin increased 23 basis points and should continue to improve in the rising rate environment.”
The bank’s net interest margin in the second quarter reached 2.26%.
Higher yields on treasury securities, loans and investments drove up Butterfield’s net interest income to $82 million for the quarter, an increase of $6.1 million from the first quarter and up $7.3 million compared to the second quarter of 2021.
The result was slightly moderated by higher deposit costs, particularly in the Channel Islands, the bank said.
Second quarter non-interest income of $51.8 million was $1.9 million higher compared to the previous quarter and up $3 million from last year. This was the result of higher trust revenue, the recognition of unclaimed assets and, compared to last year, higher foreign exchange commissions.
Because of deteriorating macroeconomic conditions and loan originations, Butterfield has made higher provisions for credit losses of $0.7 million during the period, compared with a net credit recovery of $0.7 million in the first quarter.
Butterfield is the largest member of a consortium of banks that in June have converted a US$403 million line of credit loan facility into a 3.25% fixed-rate 15-year loan to the Cayman Islands government. This was one of the factors for the increased provision for credit losses, according to the bank’s financial statements.
Butterfield’s non-interest expenses increased by $1 million to $83 million during the period. But this was $1.8 million lower than during the same quarter last year, because of a one-time programme in 2021 that allowed employees to receive payment for unused vacation time during the pandemic.
Deposit balances of $13.1 billion were lower than last year’s $13.9 billion, the bank said, “due to the anticipated normalisation of pandemic-related elevated deposit levels” and a stronger US dollar. However, deposits continued to remain elevated across all jurisdictions.
The bank’s board declared a quarterly dividend of $0.44 per common share to be paid on 22 August to shareholders of record on 8 August.
Butterfield’s total regulatory capital ratio of 21.4% remains well above the Basel III requirements.
During the quarter, the bank joined the United Nations Global Compact, the world’s largest corporate sustainability initiative
Collins said, “Participating in the UNGC reinforces our commitment to ethical and responsible business practices and gives us an organising framework as we continue to develop our environmental and social responsibility programmes, aimed at creating shared value for the for the communities in which we operate.”
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