S&P Global Ratings has upgraded its outlook on Butterfield Bank’s BBB+ long-term credit rating to stable from negative, based on the bank’s improving capital profile and Bermuda’s improving economic growth.

The ratings agency said it also revised the economic risk trend in its Banking Industry Country Risk Assessment to positive from stable.

S&P said in its report: “Economic risk — an important component in our bank ratings — in Bermuda, Butterfield's home market, is also improving after years of subpar economic performance thanks to good GDP [gross domestic product] growth, lower credit losses, and improving private debt levels.”

Butterfield’s rating benefited from increased regulatory capital and lower unrealised losses in its securities books.

“In our view, the risk posed by high unrealised losses in BNTB's securities portfolio to the bank's capital has diminished compared to two years ago, while the bank has maintained above-peer-average liquidity and profitability metrics,” S&P reported.

Butterfield Tier 1 ratio — a measure of capital strength — rose to 27.6 per cent at year-end 2025 from 20.3 per cent in 2022.

The bank’s S&P Global Ratings risk-adjusted capital ratio was 16.2 per cent. “We typically consider RAC ratios above 15 per cent very strong, but BNTB's still elevated unrealised losses temper our assessment,” S&P stated.

The analysts calculated a return on average common equity of 21.5 per cent in 2025, well above the levels of most banks in North America, leaving S&P to conclude that “the company has solid profitability to replenish capital”.

The report cited falling economic risk in Bermuda.“ The island's large insurance and reinsurance sector, which remains healthy, has largely supported economic growth,” S&P stated. “Private sector debt also continues to decline, and we expect credit losses to remain low.”

At year-end 2025, Bermuda accounted for approximately 43 per cent of the bank’s revenues, while the Cayman Islands contributed 31 per cent and its Channel Islands/UK operations generated 18 per cent. “We anticipate BNTB will continue to focus growth in the Cayman Islands and Channel Islands,” S&P added.

The ratings agency added: “Our stable outlook reflects our expectation that the bank’s good profitability, improved capital position, and prudent liquidity management will allow it to continue to perform well as unrealised losses in its securities portfolio fall further. We expect BNTB to grow at a measured pace as it looks to expand across its markets.”

Ratings on HSBC Bermuda (A-/stable/A-2) were unaffected, S&P added, despite the improved economic environment. “We already incorporate two notches of uplift into our ratings on HSBC Bermuda for its strategic importance to the HSBC group, but limit its rating at a notch below HSBC's group stand-alone credit profile,” S&P explained.