Outlining the need to recognise a loss of $14.54 million from discontinued operations in the third quarter, Calum Johnston, President & Chief Executive Officer said "the portfolio of loans remaining from the discontinued business in the United Kingdom has proven more difficult to collect than was originally anticipated. Arranging for other banks to take over the accounts in many cases has been frustrated by the borrowers' lack of capital. Undercapitalised companies are vulnerable to declines in the economy and to ensure that losses arising from any such declines in the future do not have a negative effect on our steadily improving results we have increased the provision for losses from discontinued business by $14.54 million. This was accomplished in the third quarter by reversing $12.29 million of general provisions previously provided against loans relating to continuing operations. Accounting convention requires this amount to be credited to interest income and deducted from net income from continuing operations for the quarter under review," advised Mr. Johnston.
"The discontinued loan book totalled $35.74 million as at 31 March 2000, against which the Bank
has specific and general provisions totalling $21.56 million, or 60.3% of the portfolio. We believe these provisions will be sufficient to meet any losses arising in the course of the complete liquidation of this portfolio", said Mr. Johnston. "Provisions also exist in respect of the Bank's continuing business. Specific provisions of $10.71 million are in place in respect of all anticipated losses arising from the book of non-performing loans totalling $21.06 million. In addition, we have a general provision of $16.63 million in respect of the book of performing loans, which represents 1.20% of those loans."
Commenting on the performances from the Bank's continuing operations, Richard Ferrett, Executive Vice President & Chief Financial Officer said, "all businesses are now producing significantly increased contributions, many at record levels. This is particularly the case in Bermuda in our Community Banking and Asset Management businesses. We are particularly
proud that, for the third year running, the bank won a prestigious award from Standard & Poor's. The AAAm rated Butterfield Money Market Fund US dollar and GBP classes were placed First in the World over five years in their respective groups through December 1999. Overseas, both Grand Cayman and Guernsey have been achieving record earnings levels; the latter reflecting the acquisition of the ANZ Bank (Guernsey) Limited in January 2000. In addition, our Hong Kong operation continues to produce consistent positive earnings, in contrast to last year."
"Net income of $29.40 million for the first nine months, after losses of $14.54 million from discontinued operations, was a record for the bank and highlights the substantial progress achieved at the Bank over the past two years. Third quarter net income of $10.23 million, after losses from discontinued operations, was the seventh successive quarter on quarter increase and was up 11.1% on the same quarter in 1999. It is pleasing to note the significant improvement in fee income, which at the nine months stage stood at $64.13 million, up $3.77 million, or 6.2%, on last year. This reflects strong all round performances Group wide, particularly in the area of trust and executorship fees. Net interest income has also evidenced strong growth", said Mr. Ferrett. "This reflects the improving quality and growth of the loan portfolio, which saw a net increase year on year of some $212 million, or 19%, coupled with an increase of some $108 million (6.6%) in the Bank's high quality investment portfolios. Expenses have risen year on year by $8.29 million, though this was in line with budget and is due mainly to an 8.1% increase in employee salaries and benefits and planned investment in the Bank's operating systems in Bermuda."
Other Financial Highlights of the first nine months (after losses from discontinued operations) were:
· Return on equity was 16.0% for the nine months and 16.7% for the third quarter, compared to 15.5% at the same stage last and 15.8% for the second quarter this fiscal year.
· Earnings per share increased year on year by 18 cents to $1.60, of which 56 cents was achieved in the third quarter.
· The efficiency (or cost income) ratio for the first three quarters was 74.7%, compared to 75.6% a year ago.
· The return on assets for the first nine months improved by 0.1% to 0.9% from a year ago and the net interest margin widened to 2.2%, compared to 1.6% for last year. This reflects the improved quality of, and margins emanating from, our loan portfolio.
· Total loans increased year on year by $212 million, reflecting the successful generation of new lending demand, particularly in our Community Banking business in Bermuda, and increased loan portfolios in both Grand Cayman and Guernsey. The loan portfolio now represents some 28% of balance sheet footings.
· Total assets, as at 31 March 2000, were $4.82 billion compared to $4.38 billion a year ago; a 10.1% increase which reflects the acquisition of the ANZ Bank (Guernsey) Limited in January this year. This purchase has increased the Group's customer deposits by some $350 million and doubled both the balance sheet size and customer base of our Guernsey operation.
· Shareholders' equity increased year on year by 4.6% to $247.26 million, reflecting the increase in retained earnings less share buybacks. The Bank has now purchased for the Stock Option Trust 1,928,965 shares, representing 9.73% of its total issued shares, at a cost of $31.70 million to satisfy its obligations under an Employees Stock Option Plan. In addition, in the third quarter under the Bank's share buyback programme, 366,360 shares were purchased and cancelled at a cost of $6.39 million.
The Board has decided to increase the quarterly dividend by 1 cent to 18 cents per share payable on Monday 15 May 2000 to shareholders of record on Tuesday 2 May 2000.
Note to Editors:
The Bank's results, which are unaudited, are stated in accordance with accounting principles generally accepted in Bermuda and Canada. The Bank of Butterfield Group is a vital community bank in both Bermuda and Grand Cayman and a specialist offshore financial services company that has chosen its markets, knows them well, and uses its knowledge to benefit institutional and individual clients. The Bank, established in 1858, offers a full range of banking, credit, investment, treasury, trust and custody services through its headquarters in Bermuda, as well as offices in Grand Cayman, Guernsey, Hong Kong and the United Kingdom.
Bank of Butterfield is a publicly traded corporation with its shares listed on the Bermuda and Grand Cayman stock exchanges. The Bank's share price is published daily in the Royal Gazette and is also available on Bloomberg Financial Markets (symbol: NTB.BH) and The Bermuda Stock Exchange web site: www.bsx.com. Further details on the Bank can be obtained from its web site at: www.bankofbutterfield.com.