Deal takes edge off Butterfield Bank profit

  • Earnings report: Butterfield Bank has reported a third-quarter profit of $42.4 million. Its net income was impacted by expenses related to its acquisition of ABN AMRO (Channel Islands) Ltd this year (File photograph)

    Earnings report: Butterfield Bank has reported a third-quarter profit of $42.4 million. Its net income was impacted by expenses related to its acquisition of ABN AMRO (Channel Islands) Ltd this year (File photograph)


Butterfield Bank made a profit of $42.4 million, or 79 cents per share, in the third-quarter. That missed a 91 cents per share expectation by analysts on Yahoo! Finance.

It was also $8 million less than the same period last year.

The bank said the results had been adversely impacted by expenses related to its acquisition of ABN AMRO (Channel Islands) Ltd, a deal that closed in July.

In addition to its earnings news, the bank said Mark Lynch has joined its board as an independent director. He was previously with Wellington Management Company, and is a former US regional bank analyst with Lehman Brothers and Bear Stearns.

In the third-quarter, Butterfield’s core net income remained steady year-on-year at $48.8 million, compared with $49.1 million for the same three months of 2018.

Michael Collins, chairman and chief executive officer, called the performance “strong” and said the bank is making “excellent progress” combing the acquired ABM AMRO business with its existing Guernsey bank.

“The third-quarter results demonstrate the value of our stable and growing non-interest income, the initial benefits of a larger balance sheet with net interest income growth following the acquisition, and our continued emphasis on improving operating efficiencies,” he said.

Butterfield has declared a dividend of 44 cents per share for the quarter.

The bank’s core efficiency ratio was 62.1 per cent for the quarter, compared to 63.2 per cent a year ago.

Mr Collins said: “We have been working to integrate ABN AMRO since the early close of the deal on July 15. Client relationships and employee retention have been broadly stable throughout this period, while customer and staffing integration are progressing well.

“The expected decline in euro and sterling balances has begun as we apply a client value lens to the relationships. We have experienced the anticipated staff turnover and expect cost savings to match the levels contemplated when the deal was first announced in April.

“This is an important acquisition for Butterfield and we are pleased with the integration to date and the anticipated benefits. We continue to view this deal very favourably and believe that Butterfield’s increased presence in the Channel Islands enhances our position as a leading bank and trust company in those core markets with increased scale and improved organic growth prospects.”

Non-interest expenses were $90.4 million for the quarter, up from $82.2 million in 2018.

Non-performing loans edged up to $51.9 million, representing 1.1 per cent of the bank’s total loans receivable. At the end of 2018 the total was $48.7 million, which represented 1.2 per cent of total loans at that time.

The bank’s total regulatory capital ratio at the end of September was 19.6 per cent as calculated under Basel III, down from 22.4 per cent at the end of 2018, but above regulatory requirements.

Regarding the appointment of Mr Lynch to the board, Mr Collins said: “His background as a bank analyst and success as a portfolio manager complements the expertise of our effective and diverse Board, benefiting all our stakeholders.

“Under Mark’s leadership, Wellington Management was part of the investor group that participated in the Bank’s recapitalisation in 2010. Mark has a deep understanding of our business and markets, and recognises the value and growth potential of our franchise. Our Board deliberations will benefit from his insight and industry perspective.”

Butterfield paused its share buyback activities in April after announcing the ABN AMRO acquisition. It still has current share repurchase plan acquisition for 800,000 shares and will resume share repurchases this quarter subject to market conditions.

Click on ‘Related Media’ for Butterfield’s third-quarter earnings release

Disclosure: the writer owns shares in Butterfield Bank

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Published Oct 22, 2019 at 6:39 pm (Updated Oct 22, 2019 at 6:48 pm)

Deal takes edge off Butterfield Bank profit

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