Butterfield earnings increase / CIBC sell 19% stake in Butterfield
Butterfield earnings increase to $29M
The Bank of N.T. Butterfield & Son Limited today [April 27] announced core earnings for the first quarter ended 31 March 2015 of $29.0 million, an improvement of $5.8 million compared to $23.2 million earned in the same quarter a year ago.
The core cash return on average tangible common equity for the first quarter improved to 16.7% in 2015, compared to 12.9% in the first quarter of 2014. Reported net income for the first quarter was $26.8 million [$0.04 per share on a fully diluted basis] compared to $23.2 million [$0.03 per share on a fully diluted basis] in the same quarter a year ago, up $3.6 million.
Brendan McDonagh, Butterfield’s Chairman and Chief Executive Officer, said, “The expansion of our core businesses in 2014 under a well-defined strategy for building sustainable value in the Butterfield franchise contributed significantly to our strong first quarter 2015 results that saw core earnings improve by 25% year over year.
“The acquisition last year of the Legis trust and fiduciary services business in Guernsey was the primary driver of growth in Group trust revenues of $2.3 million. Our acquisition of select community banking business from HSBC Cayman late last year similarly augmented the growth in net-interest and non-interest income in the Cayman Islands totalling $2.7 million and $1.3 million, respectively, contributing to overall increases at the Group level.
“The combined effect of expansion of our revenue-generating client base through acquisitions, careful expense management and continued improvement in asset quality will continue to drive organic growth of capital. We will continue to deploy excess capital to enhance shareholder value through the repurchase of shares, issuance of common dividends and accretive acquisitions that bolster our core businesses. Once again, the Board has declared a common dividend of $0.01 per share based on the Bank’s strong first quarter results.
“I am pleased to note that the Bank’s progress has been recognised by Global Finance magazine, which recently conferred upon Butterfield the award for Best Developed Market Bank 2015 – Bermuda. This accolade follows awards for private client and trust services in Cayman and Guernsey from Euromoney, and Bank of the Year awards in Bermuda and Cayman from The Banker.”
Financial highlights of the quarter ended 31 March 2015 [with comparisons to the first quarter of 2014]:
Net income of $26.8 million, up $3.6 million [15.8%] from $23.2 million
Core earnings of $29.0 million, up $5.8 million from $23.2 million
Total net revenue of $92.5 million, up $4.8 million, or 5.6%
Core cash return on average tangible common equity of 16.7%, up from 12.9%
Core cash return on average tangible assets of 1.2%, up from 1.0%
Core efficiency ratio of 66.8%, improved from 69.5%
John Maragliano, Butterfield’s Chief Financial Officer, said, “We are pleased to report another quarter of double-digit earnings growth and a solid core cash return on equity of nearly 17% in the quarter. The $5.8 million year over year improvement in core earnings was largely driven by improved credit provisions and growth in the contribution from our Global Trust business; the latter largely a result of the acquisition of Legis in the second quarter of 2014.
“The improvement in credit provisions was a result of collections on non-accrual loans releasing allowances of $0.6 million, which outpaced our specific provisions of $0.5 million during the quarter compared to $3.5 million of net provisions required last year.
“With the exception of Cayman, where we assumed a sizeable portfolio of personal and corporate loans through the HSBC transaction, the size of the loan book in our major jurisdictions declined from repayments exceeding new loans written. Overall the size of the consolidated loan portfolio remained relatively flat year over year at $4 billion.
“However, we continue to see the quality of the portfolio improve, with the non-performing asset ratio now down to 1.0% of total assets. Improving asset quality, a low loan-to-deposit ratio of 46% and high capital ratios gives us the flexibility to take advantage of new opportunities to grow earnings per common share moving forward.
“The Bank continues to make progress in managing core operating expenses, with the core efficiency ratio improving by 270 basis points year over year to 66.8%.”
Related:
CIBC to sell 19% stake in Bermuda bank Butterfield for about US$155 million
Bloomberg News From Financial Post
Canadian Imperial Bank of Commerce is selling its stake in the Bank of N.T. Butterfield & Son Ltd. for about US$155 million, five years after investing in the Bermuda lender.
Butterfield agreed to buy the majority of CIBC’s 19 per cent stake, or 80 million shares, for US$120 million by the end of the month, according to a statement from the Hamilton-based bank. CIBC will sell its remaining 23.4 million shares to partner Carlyle Group for US$1.50 a share, according to the statement.
CIBC, Canada’s fifth-largest lender, agreed in March 2010 to invest US$150 million to buy a minority stake in the bank to increase its presence in the Caribbean. The transaction was part of a US$550 million investment by a group that, in addition to Carlyle, included Goshen Investments LLC and investor Julian Robertson.
Kevin Dove, a spokesman for Toronto-based CIBC, confirmed the transaction, while Carlyle spokesman Randall Whitestone declined to comment.
IMAGE: CIBC, Canada’s fifth-largest lender, agreed in March 2010 to invest US$150 million to buy a minority stake in Butterfield to increase its presence in the Caribbean THE CANADIAN PRESS/Nathan Denette CIBC, Canada’s fifth-largest lender, agreed in March 2010 to invest US$150 million to buy a minority stake in Butterfield to increase its presence in the Caribbean
For more on this story go to: http://business.financialpost.com/news/fp-street/cibc-to-sell-19-stake-in-bermuda-bank-butterfield-for-about-us155-million
Butterfield looks to charter its own course
By Scott Neil From Royal Gazette
News that the fifth-biggest bank in Canada is to end its ownership stake in Butterfield Bank has been characterised as “a real a show of independence and strength” for the Island institution by Butterfield CEO Brendan McDonagh.
“Butterfield Bank is remaining independent, and as we stay independent it gives us great flexibility going forward in the areas we want to grow in and invest in,” he said.
“I’m sure Bermuda will appreciate having a very strong bank like Butterfield on its doorsteps and managed and led from here.
“We are charting our own course.”
At the same time Mr McDonagh thanked Canadian Imperial Bank of Commerce (CIBC) for the support it has given during the past five years.
There had been speculation that CIBC might eventually takeover Butterfield Bank.
Instead, the Canadian bank, which holds 19 per cent of Butterfield’s issued common shares, is to fully divest itself from its partial ownership of the bank when the share repurchases are made, which will be on or before Thursday.
Butterfield is spending $120 million to repurchase and cancel 80 million shares owned by CIBC.
Finance group Carlyle Global Financial Services will buy CIBC’s remaining 23.4 million shares in the bank.
The stock is being repurchased at a discount price of $1.50 per share. Butterfield’s common shares closed at $1.97 on The Royal Gazette/BSX Index yesterday before the announcement was made.
In 2010, CIBC was part of a rescue investment group that pumped $550 million into the bank. At the time Butterfield was struggling due to the economy and toxic loans. It was given a new lease of life thanks to the refinancing.
CIBC and Carlyle Group each injected $150 million and took an equal 22 per cent ownership of the bank at the time. The companies bought the stock at $1.21 per share.
The new capital allowed Butterfield to de-risk its balance sheet and sell off hundreds of millions of dollars worth of troubled investments that had been backed by US mortgages.
The bank yesterday reported a first quarter profit of $26.8 million, a 15.8 per cent improvement on the same period last year.
“Our focus over the last five years has been on rebuilding value for shareholders through investment in our core businesses, accretive acquisitions, and carefully managing expenses and risks,” said Mr McDonagh, who is also chairman of Butterfield Bank.
“In executing this transaction, we will use a portion of Butterfield’s excess capital to fund the repurchase and cancellation of shares, and enhance the ownership positions and growth potential of our continuing shareholders.”
He added: “I would like to take this opportunity to tank CIBC for the confidence they showed in Butterfield with their participation in the 2010 recapitalisation, for their continued support during the last five years, and for the contributions of their representatives on the Butterfield Board.”
Shawn Beber, CIBC’s senior vice president, strategy and corporate development, is to step down from the Butterfield board at today’s general meeting.
He said: “We congratulate Butterfield’s management team on the progress they have made in restoring value to the Butterfield franchise.
“We saw this as a strategic investment five years ago, and we are pleased that we are now able to monetise that investment for our shareholders.”
In a statement, Butterfield Bank said the repurchase and cancellation of CIBC’s shares will result in a 14.7 per cent reduction in the number of outstanding common shares “which will have the effect of increasing all other shareholders’ proportional ownership positions in Butterfield”.
The bank’s book value per share is anticipated to fall 5 per cent per share as a result of the transaction, but the bank anticipates this will be earned-back in less than 2½ years.
Mr McDonagh said the discounted market price of the repurchased shares reflected the movement of such a large stock with limited liquidity. The repurchase price is 29 cents per share higher than the original purchase price, and CIBC has also accumulated share dividends along the way.
“They have done very well. Remaining shareholders will hopefully do even better,” said Mr McDonagh.
Oliver Sarkozy, managing director and head of Carlyle’s Global Financial Services Group, and a member of Butterfield Bank’s board of directors, said: “We are grateful for the partnership with CIBC, without which Butterfield’s recapitalisation and subsequent progress would not have been possible.
“We firmly believe Butterfield’s future is as full of opportunity as the past five years have been, and out participation in the transaction announced today is a validation of that belief.
“We are delighted to be able to continue to support Butterfield and its continuing investors in this important next phase in the bank’s development.”
