Butterfield records another year of losses

HAMILTON, Bermuda, Thursday February 24, 2011 – For the second consecutive year, Bermuda’s oldest bank is reporting losses in excess of US$200 million, although not as bad as 2009. 

Financial results released on Tuesday put Butterfield Bank’s losses for 2010 at US$207.6 million, after a US$213.4 million loss the previous year.

“The Bank’s 2010 loss was driven primarily by non-recurring losses associated with the strategy to de-risk the balance sheet,” it said. “These included realised losses of $113.8 million on the sale of asset-backed securities in the first quarter, the recording of other-than-temporary impairments of $60.5 million in the first quarter on structured investment vehicles, net provisions of $31.8 million taken primarily in respect of large hospitality-related corporate loans, and restructuring costs of $12.4 million.”

Oliver Sarkozy, who led the investment in the bank on behalf of The Carlyle Group, said that while unfortunate, the losses represent the culmination of the balance sheet restructuring that was necessary to put the bank back on a path of prudent risk management and sustainable growth, as was envisioned at the time of the recapitalisation. 

“We are pleased with the progress the Bank has made in this regard and happy that the Bank’s results are consistent with, if not slightly better than, our original projections,” he said.

Butterfield’s President and Chief Executive Officer, Brad Kopp, added that 2010 was a year of building a strong foundation amongst challenging economics.

He said it started with the successful capital raise bringing in new investors and an over-subscribed rights offering to the bank’s historical investor base. 

“The resultant strong capital base and good liquidity position allowed us to finalise the process of ridding the balance sheet of problematic assets and putting realisable values on remaining assets.  This leaves us with a strong capital base to withstand continued uncertainty in the global economic outlook and to support growth as our economies recover,” Kopp said. 

Despite the 2010 performance, Butterfield said it expected to return to profitability.

“Although the economic circumstances in the markets in which the bank operates remain somewhat uncertain, our strategic focus on community banking and wealth management services, along with the strong capital foundation we have in place, will, I believe, allow us to achieve future growth and sustained profitability,” Kopp said.

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