As the Chairman has noted, we have achieved strong results yet again this year. We have performed in the face of increasing competition in all our jurisdictions and worked hard to provide our customers with consistent service excellence. My colleagues throughout the Group have shown great dedication and application in growing and developing our core businesses across all our operations. I thank them for their efforts.
Our performance and service in 2005 were recognised twice with internationally-recognised awards. For the fourth consecutive year, The Banker magazine awarded us ‘Bank of the Year 2005’ in Bermuda and for the second year running Global Finance magazine named us Bermuda’s Best Bank.
This year’s success has been about more than just the combined result. Where our revenues have come from has been just as important. The international balance evident in our 2005 results is a strength for us going forward. Our acquisitions contributed 44.7 cents towards our total earnings per share in 2005. They have provided a consistent and positive contribution to our bottom line.
The strong performance from our overseas jurisidictions provided over 50% of our net income. In line with these results, by the end of December 2005 we had a greater number of Butterfield Bank Group employees working outside of Bermuda for the first time.
Attracting and recruiting top talent across all our jurisdictions remains a critical part of our development. Our philosophy is to provide a positive and all-round rewarding place for employees. Additionally we look to provide plenty of opportunity to grow and develop. For example, in Bermuda over 90% of employees received customer service training.
Overall, 2005 has been a time of consolidation as we have strengthened the platform on which we want to build. For our asset management and fund adminstration business lines, we decided it made sense to work more closely across jurisdictions. Our goal is to provide our international clients with a seamless service and also pool resources for greater efficiency. Each of these two business lines now has a Group head, who manages overall business development and ensures we grow in line with our strategy.
Our balance sheet for 2005 showed positive growth:
- Net income rose 20.9% to over $109 million
- Total assets rose 6.6% to $9.2 billion
- Loans rose 16.6% to over $3 billion
- Customer deposits, a key business for us, rose 7.3% to $7.9 billion
- Assets Under Administration rose 27.4% to rise above $100 billion for the first time
- Shareholders’ Equity rose 15.7% to almost $500 million, and
- Following our issue in 2005, Subordinated debt rose to $284 million
A key figure you will also be interested in is our efficiency ratio. This year it was 66.4% compared to 69.1% last year. This shows our expenditures are being kept well in line with our business growth. It is a figure we will continue to work to improve.
As investors you will be aware of how these results have improved shareholder value.
- Our shareprice continued to rise throughout 2005, a trend that has continued into this year
- For 2005, our Return on Equity was 23.6%, up from 21.2% last year.
- Earnings per share rose to $4.23 compared to $3.51
- Market Capitalisation rose from $0.984 billion in 2004 to $1.256 billion in 2005
- Shareholder value also increased this year to 31.4%
Looking at the performance of our individual jurisdictions, you can see that Bermuda had a sound year. Our focus on service and value-added products resulted in revenues rising in all our businesses. Of particular note is our Butterfield Fund Services business, which grew assets under administration by 58.7%.
Retail Banking saw healthy growth in its residential mortgage and personal lending portfolio, which grew over 13%. Our credit cards continued to attract new customers, helped by promotions such as our recent FIFA World Cup™ 2006 contest, run in partnership with MasterCard for both our merchant and cardholder customers.
Electronic Banking channels are increasingly becoming the first banking channel of choice. In today’s environment making sure they are kept updated and secure is a critical. In 2005, we replaced our whole ATM network in Bermuda, upgrading our machines and improving security. Additionally, we invested in our customer’s online banking security by rolling out free security tokens that are are regarded globally as one of the best ways to safeguard customers against online fraud.
Corporate banking also had a stellar year. Our Corporate lending portfolio broke through $1 billion in 2005, growing by 28%. Businesses in Bermuda are an important part of our local customer base and we will continue to partner with them to provide a responsive and innovative service.
Butterfield Asset Management focused on growing our Butterfield family of funds, increasing net income by 4.9% and increasing assets under management to $7.6 billion. One of their new funds was designed specifically for people who are new to investing. With a low minimum investment and automatic diversification in over 60 global funds, the fund has attracted a significant amount of business, even thought it was only launched at the end of the year.
Finally in Bermuda, we have continued our programme of renovations. We are still on schedule to finish our major Rosebank retrofit in 2006. 2005 also saw Consumer Credit and Electronic Banking unveil new, professional and friendly environments in which to welcome customers.
Our Caribbean operations in the Cayman Islands, The Bahamas and Barbados also experienced strong growth.
At last year’s AGM I remarked on Cayman’s recovery in the wake of Hurricane Ivan. Well, it was even more remarkable in 2005. Net income rose 85.3%. Prudent management of the loan portfolio led to a $1.6 million net release of provisions for credit losses in 2005. This compares to a charge of $3.6 million the previous year. Led by Conor O’Dea, the management and execution of our business in Cayman has been solid. Cayman saw our largest increase in employees compared to last year. However, this is in response to and in line with the increase in business.
The Cayman economy has fed off post-Ivan rebuilding and new real estate developments. We broke ground on a new building ourselves in 2005. We were the first business post-Ivan to commit to re-building so it was a very proud moment for us to start work. The Chairman, myself and Mr.Brooks were there to witness the ceremony.
In The Bahamas we focused on formalising our private banking services and organically growing business. Net income was up significantly and lending rose 78.3%. On the fund administration side, progressive legislation in The Bahamas help fuel growth. Meanwhile, Barbados continued to grow its lending portfolio, achieving a 29.4% increase in a highly competitive market.
For Butterfield Private Bank in London, 2005 was the first full financial year following the Leopold Joseph acquisition, which took place in the second quarter of 2004. London focused on the pensions market for high earners and substantial progress was made in becoming one of the UK’s major providers of Self Invested Personal Pensions. Total revenues were up 16.8%, with both loans and deposits increasing.
Guernsey had a strong year on nearly all fronts. The jurisdiction’s economy was buoyant and we managed to attract new business, establish new relationships and improve profitability. Improved business volumes with high net worth individuals contributed to Guernsey’s overall increase in total revenues of 14.5%.
We take our responsibility to the communities in which we operate seriously and focus on making sure money we spend on philanthropy or sponsorship works for the broader good of residents.
In Cayman we sponsored and hosted the premier of a film about Hurricane Ivan, called ’36 Hours in September’. The event benefited the Cayman Islands National Recovery Fund, which we helped launch back in 2004.
In Bermuda we regularly support a number of local charities and provide students with a number of annual scholarships. We sponsor key community events including the Butterfield Bank Art Festival, which will be in its tenth year in 2006, BIFF Kids and the Jason Project. Additionally in 2005, we matched our employees’ generous $11,000 donation for Hurricane Katrina victims, enabling us to make a $22,000 donation in total to the Bermuda Red Cross. We also continue to match all money raised by employees for the Butterfield Bank Employee Trust, which supports local charities.
Beyond the business we do, our communities are the places where we live and raise our families. It remains a strong belief for the Group that we all work together to make them better places.
I would like to conclude by thanking our employees throughout the Group for their continued hard work, the Board of Directors for their vision and leadership, and finally our customers, communities and shareholders for their ongoing support.
I now return the podium to Dr. King to continue the meeting.
Note to Editors:
Butterfield Bank, Bermuda’s largest independent 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. Further details on the Bank can be obtained from its web site at: www.butterfieldbank.com.
Telephone: (441) 298-6463
Cell: (441) 504-1705