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14 February 2006
Butterfield Bank Reports Record Full Year Earnings up 20.9% to $109.4 million Dividend Increase Announced

(Hamilton, Bermuda, Wednesday 15 February 2006) The Bank of N.T. Butterfield & Son Limited (“Butterfield Bank Group” or “the Group”) today reported net income for the full year ended 31 December 2005 of $109.4 million, a record for the Group and up 20.9% year on year.  Diluted earnings per share were $4.23, up 72 cents or 20.5%, on 2004. Other financial highlights include:

  • Record net interest income up 23.0% at $182.2 million
  • Record non-interest income up 10.0% at $172.1 million
  • Record assets under administration up 27.4% to $102.4 billion
  • Return on equity of 23.6%, up from 21.2%
  • Efficiency ratio improved to 66.4% from 69.1%
  • Net interest margin improved to 2.1% from 1.9%

Reflecting the Group’s continuing strong earnings performance and commitment to enhancing shareholder value the Board has decided to increase the quarterly dividend by 3 cents to 44 cents per share.  The divided is payable on Monday 6 March 2006 to shareholders of record on Thursday 23 February 2006.

 

Alan Thompson, President & Chief Executive Officer, commented,  “These results reflect the strength of the Group’s core businesses that underpins our balanced international business model. We were particularly pleased at the performance of our Cayman operation following the significant damage inflicted on the islands by Hurricane Ivan in 2004. We also continue to be very satisfied both with the progress made by our operations in Barbados and The Bahamas, and the integration of Leopold Joseph Holdings plc into our UK and Guernsey operations. We remain committed to enhancing shareholder value, as evidenced by the ‘1 for 10’ stock dividend issued last August and the dividend increase of 3 cents.”

 

Richard Ferrett, Executive Vice President & Chief Financial Officer, said, “Our financial results in 2005 continue to reflect the balance and soundness of the Group’s business model, with approximately 50% of our revenues being generated from non-interest income. Our return on equity for the year was 23.6%, up from 21.2% in 2004 and in line with our target to achieve a return exceeding 20%. Significant increases were seen in the Bank’s revenue generation with net interest income and non-interest income increasing by 23.0% and 10.0% respectively.  This reflects the growth in our customer deposit base and loan portfolio, the successful integration of our acquisitions in 2003 and 2004, and increased revenues generated by our asset management and fund administration businesses across the Group.”

 

Financial highlights for the Year ended 31 December 2005 compared with the Year ended 31 December 2004.

 

Group Results

  • Total non-interest income, at $172.1 million, is up year on year by $15.6 million, or 10.0%. This reflects strong revenue growth from asset management (+20.8%), foreign exchange (+17.3%) and investment and pension fund administration (+15.4%).
  • Net interest income before credit-related provisions, at $185.3 million, was a record and is up year on year by $34.4 million, or 22.8%, reflecting balance sheet growth. During the year the Group made net provisions of $3.2 million in respect of credit losses, compared to $2.9 million in 2004. 
  • Total operating revenue grew year on year by $44.0 million, or 14.1%, to $355.1 million.
  • Total operating expenses increased year on year by $21.7 million, or 9.8%, to $244.2 million, a lower percentage than that seen for operating income. As a result, the efficiency ratio improved from 69.1% in 2004 to 66.4% in 2005. Personnel-related expenses were up 13.2% year on year, to $144.3 million, primarily reflecting the expanding size of the Group. Total headcount at 31 December 2005 was 1,597 (2004: 1552), including 789 in Bermuda, compared to 786 a year ago.
  • Corporation tax for the year was an expense of $1.6 million, which represents 1.5% of net income pre-tax, compared to a credit of $1.7 million in 2004. The Group also expensed $11.9 million in non-profits related taxes, up from $10.8 million the previous year, primarily reflecting an increase in employer-related payroll tax paid in Bermuda.
  • Total assets of the Group as at 31 December 2005 were $9.2 billion, up from $8.6 billion a year ago. The increase reflects solid growth in customer deposits, which have increased year on year by 7.3% to $8.0 billion.
  • The loan portfolio increased year on year by 16.6%, or $440 million, to $3.1 billion. This increase reflects increased loan demand across all of our businesses, in particular in Bermuda, up 20.5%, Guernsey, up 16.6%, and the UK, up 9.7%. The loan portfolio now represents 33.5% of total assets, compared to 30.7% a year ago. Non-performing loans totalled $27.0 million at 31 December 2005, representing 0.9% of total loans, compared to 0.8% last year. Loan provisions totaled $24.7 million at year-end, representing a coverage ratio of 91.7% of non-accrual loans. 
  • The Group’s balance sheet remains highly liquid with a loan to customer deposits ratio of 38.8%. Deposits with banks and investments increased year on year by 1.8% to $5.8 billion and represent 62.7% of total assets
  • Assets under administration across the Group increased year on year by 27.4% to $102.4 billion. Assets under investment management now stand at $9.4 billion including assets of $5.2 billion in the Butterfield Funds.
  • Shareholders’ equity increased year on year by 15.7% to $495.2 million. The loan to the Stock Option Trust remained unchanged year on year at $25.5 million, due to the exercise by employees of stock options being offset by purchases of shares by the Trust. The Group has financed the purchase for the Stock Option Trust of 5.9% (2004: 6.4%) of the total shares in issue to satisfy its current and future obligations under the Directors’ and Executive Officers’, and Employee Stock Option Plans. The Stock Option trust bought 285,854 shares at a cost of $12.6 million at an average price of $44.10 to satisfy the Group’s obligations with regards to the Stock Option Plan. In addition, over the course of the year the Group bought back and cancelled 32,890 shares, at a cost of $1.4 million, under the Share Repurchase Programme at an average price of $41.46.
  • Basic earnings per share was $4.34, up 19.9% on 2004. Diluted earnings per share increased by  20.5% to $4.23.
  • The increase in shareholder value for the year, defined as the increase in share price plus re-investment of dividends in the Group’s shares, was 31.4%.

 

The Bahamas

  • The Bahamian businesses achieved net income of $1.7 million compared to $0.7 million a year ago.  Total revenues were up year on year by 15.9% to $6.8 million, reflecting strong growth in fees earned from fund administration and banking services. At year-end, total assets were $96.9 million compared to $63.4 million a year ago, and client assets under administration were $4.0 billion.

Barbados

  • Butterfield Bank (Barbados) Limited made net income of $1.4 million in 2005, up from $0.3 million the previous year.  Total assets increased year on year by 12.2% to $194.4 million. This reflects both significant growth in the total loan portfolio, up 29.4% to $109.5 million, and in customer deposits, up 14.9% to $159.4 million.

Bermuda

  • In Bermuda, total revenue increased year on year by $13.9 million, to $200.1 million, when excluding the $5.8 million gain in 2004 from sale of a venture capital investment. Community Banking’s net interest income before loan provisions was up 13.0% to $106.9 million, reflecting strong loan growth and a $282.6 million increase in total assets to $4.5 billion. Net income for the year was $28.1 million. The Wealth Management & Fiduciary Services and Investment & Pension Fund Administration businesses achieved a 13.1% growth in net income to $31.0 million. This reflects significant growth in client assets under administration, up 35.6% to $45.2 billion, and increased fee generation from asset management, up $2.0 million year on year. The Real Estate operating segment, which represents property-related costs in Bermuda, recorded a net expense of $6.2m in 2005, up $0.4 million over 2004. This reflects upgrades to the Bank’s premises during the year. Net income from the Bermuda businesses represented 48.3% of Group net income in 2005, compared to 75.9% in 2004, reflecting the strong growth in net income from the Group’s businesses located outside of Bermuda. 

Cayman Islands

  • Cayman recorded record net income of $45.8 million, up year on year by $21.1 million, or 85.3%. This represents a return on equity of 33.0%, up from 22.2% in 2004 and reflects the robustness of the Cayman economy over the past year after Hurricane Ivan. Net interest income before loan provisions was up 42.7% on 2004, at $44.1 million, while non-interest income totaled $36.5 million, an increase of 26.1% on 2004. The efficiency ratio in Cayman saw a significant improvement, from 52.7% in 2004 to 45.2%. Following a review of the loan portfolio there was a $1.6 million net release of provisions for loan losses compared to a charge of $3.6 million in 2004. Total assets increased year on year by 11.0% to $2.6 billion, whilst client assets under administration increased by 26.5% to $31.7 billion.  Assets under management in respect of Cayman’s clients at 31 December 2005 were $855 million, up 17.8% year on year.

Guernsey

  • In Guernsey, post tax net income increased by $4.6 million to $7.2 million. Total revenues grew year on year by 14.5% to $40.1. Private client business, including deposit and loan volumes, demonstrated strong growth and the benefits of the acquisition of Leopold Joseph’s Guernsey operations in 2004.  Good growth was seen both in property-related lending and facilities collateralised by securities portfolios. Custody services also registered strong business growth and we continue to be the market leaders for administered banking in the jurisdiction. Total assets increased year on year by $52.8 million to $1.5 billion, despite the UK pound weakening by 10.3% against the dollar over the course of 2005. Assets under management for Guernsey clients total $0.9 billion, in line with a year ago, although the underlying increase before the impact of exchange rate translation movements was  13.5%. Client assets under administration at year-end stood at $20.2 billion, up from $16.4 billion in 2004.

United Kingdom

  • In the UK, Butterfield Private Bank recorded significant progress in 2005, with total revenues up 16.8% to $22.6 million. A post tax loss of $0.3 million was recorded, compared to a loss of $7.2 million the previous year.  It is pleasing to note that in both the last two quarters of 2005 the Bank recorded a profit, in line with expectations. The loan portfolio increased by 8.6% to $423.2 million, while customer deposits increased year on year by 15.1% to $929.1 million. Total assets now stand at $1.2 billion, up from $1.1 billion in 2004 despite the weakening of the UK pound.  Assets under management for UK clients total $0.7 billion, in line with a year ago, although the underlying change before the impact of exchange rate translation movements was a 6.7% increase.

Note to Editors:

 

The Group’s results, which are unaudited, are stated in accordance with US GAAP. Butterfield Bank, Bermuda’s first and largest indigenous bank, offers a full range of Community Banking services in Bermuda, Barbados and the Cayman Islands, encompassing retail and corporate banking and treasury activities. As a specialist offshore financial services group the Bank also provides Private Banking, Wealth Management & Fiduciary Services and Investment & Pension Fund Administration Services from its headquarters in Bermuda, and its subsidiary offices in the Cayman Islands, Guernsey, The Bahamas and the United Kingdom.

 

Butterfield Bank is a publicly traded corporation with its shares listed on the Bermuda and Cayman Islands stock exchanges. The Bank’s share price is published daily in The Royal Gazette: www.theroyalgazette.com and is also available on Bloomberg Financial Markets (symbol: NTB BH) and The Bermuda Stock Exchange web site: www.bsx.com. Certain statements in this press release may be deemed to include ‘forward-looking statements’ and are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, including worldwide economic conditions, success in business retention and obtaining new business and other factors. Further details on  Butterfield Bank can be obtained from our web site at: richardferrett@bntb.bm

 

Media Relations:
Anna Lowry
Marketing & Communications
Phone: (441) 298-6463
Fax: (441) 295-3878
e-mail: annalowry@bntb.bm

 

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