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Butterfield nets high returns even through pandemic

The Bank of N.T. Butterfield & Son Limited has declared second quarter net income of $39.6 million ($0.79 per diluted common share), compared to net income of $41.6 million for the previous quarter and $34.3 million for the second quarter of 2020.

The efficiency ratio for the second quarter of 2021 was improved at 67.4 per cent, compared to both the previous quarter and last year’s second quarter. A core return on average tangible common equity was 18.7 per cent, despite a sustained low interest rate environment.

The Board again declared a quarterly dividend of $0.44 per common share to be paid on August 24 to shareholders of record on August 10.

Butterfield chairman and chief executive officer Michael Collins commented: “Our consistent high returns, even through the pandemic, is the product of a business model characterised by low credit risk, substantial liquidity, strong fee income, and favourable competitive dynamics.

“We are able to generate a recurring 15 per cent to 25 per cent core return on average tangible common equity throughout the interest rate cycle, while only lending in our home jurisdictions, where we have market knowledge, and investing excess deposits in US Government Treasuries and Agencies.

“In the second quarter, Butterfield generated higher non-interest income and steady net interest income. We remain committed to the thoughtful management of capital which we allocate to a sustainable quarterly dividend, modest organic growth, potential acquisitions, and share repurchases subject to market conditions.

“As our deposits continue to grow through deepening corporate, trust, and private banking relationships, we will monitor the duration of these liabilities to offer off-balance sheet investment products where appropriate.”

All operating jurisdictions fared well during the pandemic as economies closed. International business in Bermuda, Cayman, and the Channel Islands was largely unaffected due to the success of remote working models.

The bank continues to seek private trust and in-market banking opportunities for acquisitions.

Net interest income of $74.7 million, was down $0.2 million compared the previous quarter and down $4.4 million from last year’s corresponding period.

Non-interest expenses were higher in the second quarter of 2021 compared to the prior quarter and the second quarter of 2020 primarily due to costs associated with the transfer of the Channel Islands banking operations function from Mauritius to Butterfield's service centre in Canada and Guernsey, increased consultancy and staff incentive costs, and a one-time payout programme for pandemic-related unused vacation.

Deposits continued to grow across all jurisdictions as customers maintained elevated deposit balances. The bank continued its balanced capital return policy.

During the second quarter of 2021, Butterfield also repurchased 0.1 million common shares under the bank's current 2.0 million common share repurchase plan authorisation. The current total regulatory capital ratio as at June 30 was 19.5 per cent as calculated under Basel III, compared to 19.8 per cent as at December 31, 2020. Both of these ratios remain significantly above the Basel III regulatory requirements applicable to the bank.

The bank is close to resolving the United States Department of Justice’s inquiry into Butterfield’s legacy business with US clients which dates back to late 2013.

The financial component of such resolution would be in line with the existing provision of $5.5 million in the bank’s financial statements as recorded in 2015 and 2016.

Butterfield Bank Chairman and Chief Executive Officer Michael Collins (Photograph by NYSE)

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Published July 27, 2021 at 8:48 am (Updated July 28, 2021 at 8:03 am)

Butterfield nets high returns even through pandemic

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