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25 July 2006
Butterfield Bank Reports Second Quarter Net Income of $33.9 million, up 12.7% year on year. Announces ‘one-for-ten stock’ dividend.

Hamilton, Bermuda - 25 July 2006:The Bank of N.T. Butterfield & Son Limited today reported net income for the second quarter ended 30 June 2006 of $33.9 million, up 12.7% year on year. This brings the year to date net income to $66.9 million, up 23.1%. Diluted earnings per share were $1.28, up 11 cents on last year and up 2 cents on the previous quarter.

 

 

Financial highlights of the quarter include:

  • Return on equity, at 25.1%, remains in excess of 20%
  • Efficiency ratio of 64.8%, improved from 65.0%
  • Net interest income of $53.6 million, up 17.1%
  • Non-interest income of $49.3 million,up 10.5%
  • Customer deposits of $8.8 billion, up 14.8%
  • Total assets of $10.2 billion, up 12.1%
  • Assets under administration of $108.6 billion, up 15.9%

 

Reflecting the Group’s continuing strong earnings performance and commitment to enhancing shareholder value the Board has approved a one-for-ten bonus share issue, which equates to a 10% stock dividend, effective Monday 7 August 2006, in addition to maintaining the quarterly dividend at 44 cents per share. The cash dividend is payable on Friday18 August 2006 to shareholders of record on Monday 7 August 2006. The bonus shares will be eligible for dividends commencing November 2006.

 

 

Alan Thompson, President & Chief Executive Officer, said: “These results again demonstrate the continuing effectiveness of our business model in a highly competitive environment.  Our strategic focus on developing core businesses has resulted in continued growth across the jurisdictions in which we operate. Our Bermuda businesses are continuing to do well, with both our Corporate Banking and Retail Banking businesses demonstrating how quality customer service can attract and retain business.  It was particularly pleasing that in its annual ‘Awards for Excellence’, Euromoney Magazine, the world’s leading publication covering global banking and finance, selected Butterfield Bank as Best Bank for Bermuda. This confirms our positioning as the premier community banking partner in Bermuda. Our Guernsey businesses achieved strong growth in net income, up 59.6%, whilst continued solid growth was also seen in Barbados, Cayman and The Bahamas. In London our UK business recorded a 12.6% year on year increase in total income, reflecting continuing progress since the acquisition of Leopold Joseph two years ago, and made a positive contribution to the Group’s net income. Overall, our results reflect the commitment and professionalism of our employees and I am proud to see their continuing dedication to excellent customer service, which is a key driver in our success.”

 

Richard Ferrett, Executive Vice President & Chief Financial Officer, said: “We are pleased that during the quarter Standard & Poor’s placed Butterfield Bank’s investment grade ratings on ‘positive watch’, noting our continuing improvements in profitability, our conservative and highly liquid balance sheet, and strong market position in Bermuda. The Group remains committed to the prudent management of its expense base and we are also pleased to see an improvement in the efficiency ratio, at 64.8% for the quarter. This reflects strong growth in operating revenue, up 15.9% on a year ago. In particular net interest income increased by 17.1% and revenues from investment and pension fund administration and banking services increased by 17.0% and 9.3% respectively. Our return on shareholders’ equity was 25.1% for the quarter and now stands at 25.7% for the first six months of this year, compared to 24.7% at the same stage in 2005, and is consistent with our target to achieve a return exceeding 20%. The Group’s customer deposit base increased by $1.1 billion, or 14.8%, and also noteworthy has been the growth in the Group’s assets under administration, which at $108.6 billion are up year on year by 15.9%.“

 

Financial highlights of the Quarter ending 30 June 2006 compared with the Quarter ending 30 June 2005:

 

Group Results

  • Total non-interest income, at $49.3 million, was a record and is up 10.4% or $4.7 million. This reflects strong growth in revenues from investment and pension fund administration, up 17.0%, customer-driven foreign exchange, up 13.8%, and banking services, up 9.3%.
  • Net interest income of $54.2 million before credit related provisions, was also a record and is up year on year by $9.2 million, or 20.3%, reflecting balance sheet growth across all the Group’s operations. During the quarter the Group made provisions for credit losses of $0.6 million, principally reflecting growth in the Bermuda loan portfolio, compared to a recovery of $0.7 million a year ago. Average interest earning assets increased year on year by $1.2 billion to $10.1 billion and the net interest margin for the quarter was 2.2%, compared to 2.1% a year ago.
  • Total revenue increased year on year by $14.3m, to $104.7m, compared to an increase in non-interest expense of $9.9 million to $69.8 million. The efficiency ratio improved from 65.0% a year ago to 64.8% for the quarter. Personnel-related expenses increased by $6.2 million, up 17.8% year on year, reflecting an increase in the headcount, which has risen from 1,590 a year ago to 1,660,  to support business growth, and included an incremental expense of $0.5 million relating to the adoption of SFAS 123R regarding ‘Share Based Payments’.
  • Total assets of the Group as at 30 June 2006 was a record $10.2 billion, a 12.1% increase from $9.1 billion a year ago. The increase reflects solid growth in customer deposits, which have increased by $1.1 billion, or 14.8%, to $8.8 billion.  The return on assets for the quarter was 1.3%, in line with the same quarter in 2005.
  • The loan portfolio increased year on year by 18.5%, or $525 million, to $3.4 billion reflecting increased loan demand, particularly in our Bermuda and Guernsey based businesses, and represents 33.0% of total assets, compared to 31.2% a year ago. Non-accrual loans totaled $26.3 million at 30 June 2006, down $4.0 million from that reported at 31 March 2006, and represent 0.8% of total loans, in line with a year ago.
  • The Group’s balance sheet remains highly liquid with a loan-to-customer-deposits ratio of 38.0%. Deposits with banks and investments were $6.4 billion at 30 June 2006 and represent 63.1% of total assets.
  • Client assets under administration across the Group increased year on year by $14.3 billion, or 15.2%, to $108.6 billion, reflecting the growth in administration services to mutual and hedge funds. Client assets under investment management in Butterfield funds stood at $5.6 billion at 30 June 2006, up $0.1 billion on the previous quarter.
  • Shareholders’ equity increased year on year by 20.6% to $555.4 million. The loan to the Stock Option Trust at 30 June 2006 was $21.0 million; down from $22.2 million a year ago, reflecting the exercise of employee stock options. The Group has financed the purchase for the Stock Option Trust of 4.8% of the total shares in issue to satisfy its obligations under the Directors’ and Executive Officers’ and Employee Stock Option Plans. During the quarter under review the Bank’s Stock Option Trust purchased 2,543 shares at a cost of $0.1 million. No such purchases were made in the corresponding quarter a year ago. There were no purchases made during the quarter under the Bank’s Share Buy-Back Plan, compared to the purchase and cancellation of 4,371 shares at a cost of $0.2 million in the second quarter of 2005. During the six months ended 30 June 2006 the Bank’s Charitable Foundation bought 107,777 shares at a cost of $6.1 million; there were no purchases made by the Foundation in the like period in 2005.
  • Diluted earnings per share for the quarter were $1.28, up 11 cents, or 9.4% year on year. Basic earnings per share for the quarter were $1.31, compared to $1.19 cents a year ago.

 

Bermuda

  • Net income from the Group’s Bermuda based businesses was $16.0 million, up 7.2%, or $1.1 million, year on year, reflecting a 14.0% increase in total revenues to $57.8 million. The Community Banking loan portfolio increased year on year by 13.6% to $2.1 billion, whilst customer deposits increased by 10.7% to $3.7 billion. The Wealth Management, Fiduciary Services and Investment and Pension Fund Administration businesses achieved a 19.4% year on year growth in total revenues to $19.7 million, reflecting the increase in client assets under administration, which grew by $2.9 billion, or 7.6%, year on year. During the quarter a gain of $1.5 million was recorded on the sale of a non-operating property.

Barbados

  • In Barbados net income, at $0.5 million, was up $0.2 million, or 55.9%, year on year as a result of strong growth in total revenues at $3.4 million, compared to $2.6 million last year. Total assets, at $204.6 million, are up 17.2% year on year reflecting a 19.9% growth in customer deposits to $166 million. The loan portfolio increased year on year by 18.3% to $112 million.

Cayman Islands

  • Cayman recorded net income of $13.7 million, up year on year by $1.0 million, or 7.9%; the increase reflecting continued strong business growth. Total income, at $24.4 million, was up 12.4%, reflecting growth in revenues from investment and pension fund administration and banking activities. Total assets now stand at $2.5 billion, up 7.7%. Customer deposits increased by 6.9% to $2.1 billion and the loan portfolio increased year on year by 13.5% to $328 million. Client assets under administration now stand at $35.4 billion, up 14.3% on the previous year, reflecting growth in investment and pension fund administration services.

Guernsey

  • Guernsey's net income, at $2.7 million, is up $1.0 million, or 59.6%, year on year, primarily reflecting strong revenue growth across all business lines, with total revenue rising by 24.1% to $12.4 million.  Organic growth in investment and pension fund administration, custody and investment services, and high activity levels in the trust business, were major factors underlying the increase in revenues. Customer deposits increased by 11.8% to $1.6 billion and the loan portfolio grew by 70.2% to $307 million. Client assets under administration increased by $7.3 billion to $23.3 billion, whilst assets under investment management increased by 24.8% to $0.9 billion.

The Bahamas

  • The Bahamas achieved net income of $0.5 million on total revenues of $2.2 million; up from $0.4 million and $1.6 million respectively a year ago, reflecting solid growth in net interest income and fees from fund administration.  Customer deposits have increased year on year by 42.0% to $104 million, and the loan portfolio, at $12 million, has doubled over the past year, reflecting the Bank’s mortgage product. Client assets under administration were $4 billion as at 30 June 2006.

United Kingdom

  • In the UK net income of $0.2 million was achieved, reflecting a 12.6% year on year increase in total revenues to $6.5 million. Customer deposits grew by 52.9% year on year to $1.2 billion, whilst the loan portfolio increased by 21.2% to $488 million. As a result total assets at 30 June 2006 stood at $1.5 billion, up 30.8%r.

Note to Editors:

 

The Group’s results, which are unaudited, are stated in accordance with US GAAP. The Butterfield Bank Group, 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 provider the Group also provides private banking, wealth management, fiduciary services, and investment and pension fund administration services from its headquarters in Bermuda, and its subsidiary offices in the Cayman Islands, Guernsey, The Bahamas and the United Kingdom.

 

The Butterfield Bank Group is a publicly traded corporation with its shares listed on the Bermuda and Cayman Islands stock exchanges. The Group’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: www.butterfieldbank.com.

 

Investor Relations:
Richard Ferrett
Chief Financial Officer
Phone: (441) 299-1643
Fax: (441) 295-1220
e-mail: richardferrett@bntb.bm

 

Media Relations:
Stuart Roberts
Marketing & Communications
Phone: (441) 298-4610
Fax: (441) 295-3878
e-mail: stuartrberts@bntb.bm

 

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