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Butterfield to build on Credit Suisse business

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Butterfield Bank (File photograph)

Butterfield Bank’s future growth will include consideration of more acquisitions, especially private trust fee-based businesses such as the one just completed with Credit Suisse.

This was the word during the fourth quarter 2023 earnings call last week, in which the bank’s top officers entertained questions from market analysts.

Butterfield had just announced financial results which included net income of $225.5 million (up 5.4 per cent from FY 2022); profit margin of 39 per cent (in line with FY 2022); and, earnings per share of $4.62 (up from $4.32 in FY 2022).

Banking performance indicators included net interest margin of 2.80 per cent (up from 2.41 per cent in FY 2022); and, cost-to-income ratio of 58.1 per cent (down from 58.9 per cent in FY 2022).

The bank’s fourth quarter and year end results were well received by the market, with Simply Wall Street calling it a good week for the bank.

They wrote: “The shares gained 2.4 per cent to $30.13. Bank of NT Butterfield & Son reported in line with analyst predictions, delivering revenues of $579 million and statutory earnings per share of $4.58, suggesting the business is executing well and in line with its plan.”

Good template: Michael Schrum, Butterfield Bank president and group chief risk officer (Photograph supplied)

Michael Schrum, president and group chief risk officer said opportunity was ripe for the purchase of more private trust fee-based business.

He said: “I think we have a pretty good template of how we would want to do that in order to make sure that we have a risk profile that matches our existing tolerance of the newly acquired assets.

“Although the Credit Suisse deal was pretty small in scale, there are still some others out there. But the bottom line is we seem to have a lot of capital.”

Michael Collins, Butterfield’s chairman and chief executive, noted: “The deal was structured as an asset purchase rather than an entity purchase, which has given us the flexibility to review and select each client to help us take only the clients that are consistent with our risk tolerance.

“This process has been time-consuming but has resulted in a high-quality book of business.”

The transaction increases Butterfield's presence in Singapore, where the bank’s leadership expects significant growth in the private trust market.

Mr Collins said: “We are pleased to have more than 20 new colleagues join Butterfield to help service the 560 new trust clients we have now onboarded.

“New assets under administration total approximately $24 billion. We expect annual fees from the new business to total approximately $9 million, with new annual expenses of around $6 million.

“We also expect to continue to grow this book over time. In total, we recognise a new intangible asset of $27.3 million, with around one-third of the total consisting of deal and onboarding expenses.

“I look forward to continuing our business development efforts and our search for other trust and banking M&A opportunities to help continue our profitable growth.”

Mr Collins said the turmoil in regional banking last year allowed the bank to demonstrate the benefits of Butterfield's strong market positioning, conservative balance sheet and liquidity management, and client relationship banking model.

He said: “This model continues to demonstrate strength and resilience from a high fee to income ratio, limited credit risk in our investment portfolio, a 40 per cent loan to deposit ratio, a high degree of liquidity, and a robust deposit base diversified across jurisdictions, sectors, and currencies.

“We are well positioned for the future and expect growth to be both organic and driven by potential M&A.

“In 2024, we will build on the successes of 2023 with a strong focus on client experience and continuing to create shareholder value.”

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Published February 19, 2024 at 6:58 am (Updated February 19, 2024 at 6:35 am)

Butterfield to build on Credit Suisse business

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