For the second time in its 168-year history, Butterfield Bank yesterday agreed to a deal which involves the Canadian Imperial Bank of Commerce taking a 22 per cent stake in the bank — but the circumstances around the two transactions could hardly be more different.

Butterfield’s agreement to buy CIBC Caribbean in a $1.8 billion transaction, announced yesterday morning, is partly paid for by around $700 million of Butterfield stock, which will give the Canadian bank an equity holding comprising just over one fifth of the combined business.

Back in 2010, when Butterfield was struggling for survival after incurring huge losses on its investments in packages of loans that soured during the global financial crisis, CIBC was one of a group of rescuer investors who collectively injected $550 million of fresh capital into the bank, securing its survival.

CIBC’s contributed $150 million, enabling it to acquire a 22 per cent stake, and cashed out profitably five years later.

The bank’s story in the 16 years between the two milestone deals has been one of recovery, growth and a series of acquisitions that leave the bank now poised to become a regional banking leader.

Butterfield’s purchases reflect a trend in Caribbean banking of international institutions increasingly retreating from small-island markets, creating opportunities for agile regional players to expand.

Butterfield has grasped that opportunity. Having grown from its Bermuda roots, the bank is betting that its deep experience of island economies will enable it to make a success of regional integration.

Butterfield’s acquiring spree began in 2014 with the purchase of the trust and fiduciary services business of Legis Group in Guernsey.

In 2015 and 2016, Butterfield built a platform for dominance in a fast-growing Cayman Islands market, with the purchase of most of HSBC’s banking operations in the territory.

The bank’s listing on the New York Stock Exchange in 2016 was a pivotal moment, providing a deeper and more diverse base of shareholder capital from which to grow the business.

In 2018, Butterfield added trust operations in Singapore with an acquisition from Deutsche Bank Global Trust Operations, and then purchased Deutsche Bank’s Channel Islands banking business.

ABN Amro’s private banking business in Jersey and Guernsey was purchased in 2019. And further expansion of Butterfield’s trust business came with acquisitions from Credit Suisse in 2022 and Rawlinson and Hunter earlier this year.

In an investor presentation published yesterday, Butterfield detailed how its M&A-powered growth has helped to boost profits, with earnings per share having more than doubled from $2.48 to $5.60 over the past decade.

The purchase of CIBC’s Caribbean arm, which is expected to take effect in the first half of next year, will nearly double Butterfield’s deposit base at a stroke, transforming it into a pan-Caribbean banking giant.

Butterfield claims the acquisition will make it the No 1 bank in three new markets, the Bahamas, Barbados and the Turks and Caicos. It is already dominant in the Cayman Islands, where it estimates the CIBC acquisition will boost its deposit market share to 50 per cent.

With the CIBC Caribbean business come 2,700 employees providing banking services in 42 branches, serving around 530,000 clients.

Cutting costs through the greater efficiency that comes with added scale is clearly Butterfield’s intention, although it stresses there is little geographical overlap resulting from the deal.

By 2030, it expects to achieve annual cost savings of $49 million. The bank’s breakdown suggests the bulk of the savings will be achieved in the CIBC Caribbean businesses, for which it anticipates a 10 per cent reduction in non-interest expenses, and a 5.5 per cent reduction group-wide.

Butterfield will maintain both organisations’ operational footprints, including CIBC Caribbean’s regional headquarters in Barbados.

While total revenue is expected to more than double, 70 per cent of the combined company’s earnings are expected to come Butterfield’s existing markets, while annual earnings are expected to top $400 million by 2028.

One of the results of Butterfield’s evolution into a regional bank has been the diminishing role of Bermuda as an earnings centre.

Today, Cayman is the largest profit centre, contributing 56 per cent of Butterfield’s earnings — twice as much as Bermuda. After the combination, Bermuda is expected to account for 13 per cent of earnings, just ahead of the Bahamas at 11 per cent, while Cayman’s contribution will be 50 per cent.

Customers can expect to see “connectivity across 19 operating jurisdictions, reducing the friction of doing international business”, Butterfield states.

M&A-driven expansion comes at a price and Butterfield will be issuing $700 million of subordinated debt, for which it has already obtained commitments, to help maintain its capital strength. Butterfield had no long-term debt on its balance sheet as of March 31.

Yesterday, the market gave a cautious welcome to the news of the deal, as Butterfield’s shares climbed 1.1 per cent on the New York Stock Exchange. Time will tell whether Butterfield’s big bet pays off and Wall Street investors will be watching closely.