Cayman’s Government borrows $150m from Butterfield Bank

(CMR) The Cayman Islands Government reportedly borrowed US$150 million from Butterfield Bank last year. This is a large part of the more than $400 million the Government reportedly borrowed from a consortium of banks.

The Bank’s business deal with Cayman was disclosed in the balance sheet commentary of its reports for the fourth quarter and full year 2022. On Tuesday, executives fielded an analyst’s question about it and confirmed it was a $150 million loan, the Royal Gazette reported.

According to the Bank's annual financial report, the allowance for credit losses at December 31, 2022, totaled $25.0 million, a decrease of $3.1 million from $28.1 million at December 31, 2021. The movement was driven by a decrease in provisioned non-accrual loans, net pay downs, and foreign exchange movements in the portfolio. The Bank said this was partially offset by weaker forward-looking economic forecasts and the extension of a large, long-term government facility in the Cayman Islands.

The 15-year loan, at 3.25 percent, reportedly protected the Government from increased costs of borrowing in the face of rising interest rates. The money was invested into two-year US Treasury notes and the funding of capital expenditure projects, The Royal Gazette reported.

Meantime, Butterfield reported that net income for the year ended December 31, 2022, was $214.0 million, or $4.29 per diluted common share, compared to $162.7 million, or $3.26 per diluted common share, for the year ended December 31, 2021.

Michael Collins, Butterfield's Chairman and Chief Executive Officer, said, “Butterfield's results for the full year and fourth quarter of 2022 continued to demonstrate the Bank's strong return profile, which benefited from rising market interest rates, non-interest income growth, and disciplined expense management that helped drive the efficiency ratio below 60%.”

“As we enter 2023, we believe that Butterfield's healthy returns on common equity will continue to support investor returns and overall growth objectives. Our long-standing strategy remains focused on limiting credit exposure in our conservative investment portfolio, growth through targeted acquisitions, and thoughtful capital management. I was pleased to see tangible book value per common share recover 15.7% during the fourth quarter,” the CEO stated.

Collins said Butterfield had made good progress preparing to onboard clients and new colleagues from its previously announced acquisition of the Credit Suisse trust business in Singapore, Guernsey, and The Bahamas.

“We remain on track to progressively close the transaction during 2023. In terms of capital management, in addition to our quarterly cash dividend, we prioritize capital to support organic growth and the potential for acquisitions and plan to recommence our share repurchase activity in the first half of 2023 (subject to market conditions). I am pleased that the Board has authorized a new share repurchase program of up to 3.0 million shares,” he added.

Collins said he is optimistic about Butterfield's continuing success following the proven resilience of the Bank's business model across recent interest rate and economic cycles.

“I am also encouraged by the removal of pandemic-related travel restrictions to our island jurisdictions, which should help to bolster tourism and international business and stimulate local economies. I look forward to working alongside our great teams of people in 2023 and beyond to help clients achieve their financial goals while also enhancing shareholder value,” he stated.