Butterfield Bank shares will not become a viable buying opportunity until the bank has shown successive quarters of clean profitability, according to an analyst who follows the company.

Jeremy Dyck, an investment adviser with LOM Securities (Bahamas) Ltd., rated the bank as a 'hold' with a price target of $1.40 in his research update released this week.

In his report, he wrote that despite Butterfield's management team cleaning up the "disaster" that was the bank's investment book, they faced a host of operational challenges, including a low interest rate environment, a potentially troublesome loan book and a fluctuating deposit base.

Mr. Dyck said that in the future, given the size and duration of the recently announced US quantitative easing plan, artificially low short-term rates may be extended into the next several quarters, with interest rate spreads remaining slim.

But he said that on the flip side, improved contributions from asset management were expected on the back of the recent strengthening in worldwide capital markets.

Furthermore, Mr. Dyck said that a declining US dollar would help the bank via the currency translation of the bank's foreign revenues.

"We remain wary of further deterioration in the loan book, as the latest write-downs of hospitality industry loans came as somewhat of a surprise," he said.

Butterfield reported a third quarter net loss of $18.6 million or three cents per share and after adjusting for preferred share dividends the bank lost $23.1 million or four cents per share.

The loss was primarily due to a loan loss provision of $14.2 million relating to as-yet unnamed delinquent hotel/resort loans in Bermuda, as well as a $7.4 million loss on the sale of its subsidiaries in Malta and Hong Kong.

Mr. Dyck's report highlighted management's shift of a variety of smaller, less-tangible expenses into employee and technology-related expenditures, which it viewed as a positive step in improving efficiencies.

It concluded that the bank's Bermuda numbers were encouraging ex-loan loss provision and that its investment portfolio had stabilised with the fair value appreciating by 12.3 percent during the quarter from $2.4 billion to $2.7 billion, while its capital base held firm with a total capital ratio of 21.6 percent, tier one capital ratio of 15.7 percent and tangible common equity of 6.3 percent, all in excess of regulatory minimums.

However, the book value per share fell by a penny to $1.16 over the three-month period.