Butterfield net income drops 17%
The Bank of Butterfield saw its net income drop by 17% from $60 million to $50.6 million in the second quarter as net interest income fell and remuneration expenses rose.
The bank, which serves many of Bermuda's re/insurers, said core net income was for the second quarter was $51.4 million compared to $57 million for the same period in 2023.
Return on average common equity for the second quarter of 2024 was 20.7% 25.9% for the second quarter of 2023. The efficiency ratio for the second quarter of 2024 was 62.4%, 57.6% for the second quarter of 2023.
Net income was down in the second quarter of 2024 versus the prior quarter primarily due to higher non-interest expenses as a result of inflationary pressures, higher performance-based remuneration and benefits accruals and higher technology spend from the recently implemented core banking software, the bank said.
Net interest income for the second quarter of 2024 was $87.4 million, down $5 million from $92.5 million in the second quarter of 2023 due to higher deposit costs, despite increased yields on interest earning assets and a larger balance sheet.
Non-interest income for the second quarter of 2024 was $55.6 million, $5.5 million higher than $50.2 million in the second quarter of 2023. Non-interest income in the second quarter of 2024 was higher than the second quarter of 2023 primarily due to transaction volume-driven increases in banking and foreign exchange revenue, increased trust income from assets acquired from Credit Suisse, as well as an increase in equity pickup from a portfolio investment and higher unclaimed balances recognized in income.
Michael Collins, chairman and chief executive officer, said: “During the second quarter of 2024, Butterfield continued to deliver strong returns with sustainable non-interest income, disciplined expense management, a stable balance sheet, and a conservative credit profile. Our capital management strategy produces consistent and attractive shareholder returns through quarterly cash dividends and active share repurchases, which now includes a new share repurchase authorization.
"Growth through M&A remains a priority but, in the absence of a near term acquisition, excess capital will be allocated to support organic growth, dividends, and share repurchases.
Non-interest expenses were $91.1 million in the second quarter of 2024, compared to $83.5 million in the second quarter of 2023. Core non-interest expenses of $90.3 million in the second quarter of 2024 were higher than the $83.6 million incurred in the second quarter of 2023. Core non-interest expenses in the second quarter of 2024 were higher compared to the prior quarter and the second quarter of 2023 due to performance-based remuneration accruals and inflationary increases in staff healthcare costs; increased expense arising from the recently implemented core banking software and non-recurring outsourced consultancy and legal fees.
Period end deposit balances were $12.5 billion, an increase of 4.7% compared to $12.0 billion at December 31, 2023, primarily due to deposit increases in the Channel Islands. Average deposits were $12.4 billion in the quarter ended June 30, 2024, compared to $12.2 billion in the prior quarter.
Tangible book value per share improved by $0.58 or 3.0% this quarter to $20.03 per share.
The Bank also announced the appointment of a new independent director, Stephen Cummings, a former President and Chief Executive Officer of Mitsubishi UFJ Financial Group (MUFG) in the Americas.
“I am excited that Stephen Cummings has joined our Board and that Butterfield continues to attract such high-quality directors," Collins said. "Stephen is an excellent addition as an independent director and will further strengthen our governance and financial expertise at the Board level. I welcome Stephen to Butterfield and look forward to working with him as we continue to create value for all of the Bank’s stakeholders.”
Cummings is currently the Secretary of Finance for the Commonwealth of Virginia. Prior to his role at MUFG, he was the chairman of UBS’s Investment Banking division in the Americas, was Global Head of Corporate and Investment Banking at Wachovia Bank, and served as chairman and chief executive officer at Bowles Hollowell Conner & Co.
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