The Government backing that will allow Butterfield Bank to raise $200 million in extra capital does not amount to a bailout — after all, the bank made a profit last year.

That is the view of Butterfield's chief executive officer Alan Thompson, who told The Royal Gazette yesterday, who said the bank was "in pretty good shape".

Asked whether customers' money was safe, he said: "Absolutely."

Butterfield will issue $200 million worth of preference shares, guaranteed by the Government, which will be offered for sale to the private sector between now and June.

"This was not a bailout," Mr. Thompson said. "Reason number one is that we made money last year. All of our businesses are solid and we made record earnings in three of our jurisdictions last year — the UK, Guernsey and Barbados.

"Our loan portfolio is in excellent shape and our capital ratios at the end of 2008 comfortably met all regulatory requirements.

"We are being conservative and prudent in raising capital that will position us well for the future. We can't say what the economy is going to do — but we are pretty sure that it's not going to be real good for some time.

"Securing this $200 million puts us in a strong position going forward."

Raising money in the private sector had proved impossible, Mr. Thompson said. The capital markets had been effectively closed to banks since the collapse of US investment bank Lehman Brothers in September, he said.

The agreement with Government he characterised as "an effective public-private partnership", and he said it was typical of the interaction between governments and banks in Europe and the US.

"I have been in the banking sector for more than 40 years and I've never seen anything like this environment," he said.

"The bank has the same objective as the Government and the BMA — stability in the financial sector."

The bank's investment portfolio has been eroded in by the decline in value of holdings, particularly those linked to US residential mortgages. He said banks all over the world shared a similar problem.

But there was no sign of rising defaults or missed repayments in the bank's loan portfolio — either in Bermuda or in the other jurisdictions in which it operates.

The group's non-performing loan ratio was 0.9 percent in 2008 — the same figure that was recorded the previous year.

The bank's deposit base was also holding up well, he added.

Job cuts have been widespread in the financial sector, but Mr. Thompson suggested there was no downsizing planned at Butterfield.

"We have always had the philosophy that our workforce should be the correct size for our business," Mr. Thompson said.

"Our core operations are performing well and while we are always looking for opportunities to make efficiencies, we believe our workforce is the right size. The strength of this bank is our employees."

The rate of return for the preference shares to be offered has not yet been fixed, he said. The Government will be paid one percent for guaranteeing them.