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Butterfield aims to expand trust business

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Ringing up a rally: pictured from left during Friday's IPO launch are Michael Dunkley, the Premier, Barclay Simmons, Butterfield's chairman and Michael Collins, CEO (Photograph by NYSE)

Butterfield Bank is eyeing acquisition opportunities in the trust industry after a successful debut for its shares on the New York Stock Exchange.

Michael Collins, Butterfield’s chief executive officer, said the money the bank raises from the initial public offering will be used for “general corporate purposes”.

But he added that Butterfield is seeing opportunities to grow its fee-generating operations at a time when income from interest-rate-related products has been pressured by a long period of very low rates.

Last Friday’s first day of NYSE trading ended with Butterfield’s share price at $24.75, 5.3 per cent above the IPO price target of $23.50.

The aim of the IPO is to sell 10.6 million shares and raise $250 million. Mr Collins said Butterfield is seeking to raise $140 million from the primary portion of the IPO, which involves the sale of new shares. The secondary portion, which involves existing shareholders partially cashing out, is set to raise $110 million.

Mr Collins said: “There’s a real opportunity in the trust business. Many of the big banks are selling their trust companies and we think we can grow our scale in this area.

“We want to grow those businesses, because it increases our access to ultra high net worth individuals.”

Butterfield has made three acquisitions in the past two years that have strengthened its position as an independent, offshore private wealth manager, with a focus on acquiring wealthy clients.

These were the Legis trust and corporate services business in Guernsey, HSBC’s private banking, trust and wealth management business in Bermuda and part of HSBC’s corporate and retail banking business in the Cayman Islands.

Mr Collins said the bank had focused on becoming a leaner and more efficient operation over the past five or six years but now its focus was on growth.

Banks stocks have struggled in recent years, as low interest rates, the damage caused to them by the global financial crisis and tighter regulations that require them to hold more capital and burden them with more paperwork, combine to limit profitability.

But Butterfield’s successful IPO indicates that investors see a bright future for the bank.

The rush of money flooding into Butterfield stock left the bank with a share price more than 25 per cent higher on Friday night than 24 hours earlier when it closed at $19.30 on the Bermuda Stock Exchange.

Mr Collins, who had spent the two weeks before the IPO with the Butterfield roadshow, talking to prospective investors in several US cities, said there were several attractions.

These included the strong balance sheet, high capital ratio and relatively liquid investments, as well as Butterfield’s deep-rooted corporate and retail banking businesses in Bermuda and Cayman.

“Also fee income makes up about 40 per cent of our revenue, which is more than with the traditional banking model,” Mr Collins said.

The bank’s longevity may also help to increase investor confidence in its shares.

“We are the oldest bank trading on the New York Stock Exchange,” Mr Collins said. “What the IPO shows is that a bank with roots in Bermuda can compete on the world stage.”

Trading day: Michael Collins, Butterfield's CEO, pictured at the New York Stock Exchange last Friday (Photograph by NYSE)