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By Keith Archibald Forbes (see About Us) exclusively for Bermuda Online
While Bermuda is certainly an offshore international business and insurance center, it is not an international banking center. International banks, which in other offshore locations and also in many onshore jurisdictions, are allowed to register as banks and can operate in those countries, are not allowed in Bermuda to register or operate as banks. However, see 2018 new developments below:
2019. January 25. A fintech-friendly bank is to set up on the island and David Burt will be revealing details next week, according to a media report out of Switzerland. The Premier made the revelation in an interview today with the BBC’s Priya Patel at the Consensys Lounge in Davos, Switzerland, where he is heading the Bermuda delegation at the World Economic Forum. “I’m proud to say that next week we’ll be making an announcement revealing that a bank will be set up in the country that will start accepting crypto and blockchain companies,” Mr Burt said in the interview, according to a report on the CCN website. The discussion featured on the importance of focusing on quality over quantity when accepting businesses, CCN reported, adding that this was an issue which Mr Burt said was the main focus for Bermuda looking at crypto and blockchain companies. The island’s banks have shied away from fintech start-ups, proving an obstacle for the fledgling industry. In July, the Bermuda Government made amendments to the Banks and Deposit Companies Act 1999 to create a new type of restricted licence for banks catering to the fintech industry. At the time, Mr Burt said: “Despite the robust regulations put in place, to date our four local banks have been unwilling to offer services to newly incorporated fintech and distributed-ledger technology companies. “This is a problem that we must fix or else Bermuda will not be able to realize the possibility of economic growth that can come from a fintech industry on our shores.” Last October, Mr Burt said he had met in New York with “a number of banks that we’re looking to entice into the Bermuda market, who might have an appetite for this type of asset”.
2018. December 20. Some borrowers in Bermuda with residential mortgages, commercial loans or corporate loans will pay more interest after the US Federal Reserve raised interest rates. In response to the quarter percentage point hike in the US, Butterfield Bank said it is adjusting its interest rates on fixed-term deposits and loans. However, Clarien Bank is keeping its rates unchanged, while HSBC Bermuda has not announced any change and said if there is any impact on its rates, these “will be communicated through our usual channels”. The Fed’s interest rate hike was the fourth this year and the ninth since 2015. It lifted its interest rate by 0.25 of a percentage point, to a target range of 2.25 to 2.5 per cent. It is now estimated that the Fed will raise interest rates twice in 2019, rather than three times as was previously forecast. The change in sentiment is said to be because of concerns about slowing growth in the US and elsewhere. Bermuda has no rate-setting central bank and the island’s lenders have frequently followed the Fed’s lead. In September, when US rates last rose, Butterfield increased its lending rates in line with the Fed’s 0.25 percentage point change. Reacting to the Fed’s latest increase, Butterfield said the base rate for Bermuda dollar residential mortgages and consumer loans will increase by 0.25 per cent to 5.5 per cent. The base rate for Bermuda dollar corporate loans and US dollar loans will increase by 0.25 per cent to 6 per cent. The loan rate increases take effect on December 27, while the Bermuda residential mortgage interest rate changes will be made on March 19. For savers, there will be an interest-rate increase of between 0.1 per cent and 0.25 per cent on Bermuda dollar and US dollar fixed-term deposits with terms of 90 days or more. Those changes will take effect on December 27. Clarien Bank’s base lending rates will remain unchanged. Its Bermuda dollar base rate for personal mortgages stays at 4.5 per cent and 4.75 per cent for commercial mortgages. In September, the bank also left its base lending rates unchanged after the increase in the Fed Funds rate. Ian Truran, chief executive officer of Clarien Bank Limited, said: “The decision not to increase base lending rates reflects our commitment to constantly assess overall market conditions globally and the impact it has on our local economy. We are intensely mindful of how base lending rate changes impact our clients, and after carefully analyzing several different factors including the rise in the US Federal Reserve rate, it has been determined that we will not increase our base lending rates at this time.” Clarien recently announced increases in its deposit rates, which it said was “providing clients with a broad range of products at competitive rates to secure and grow their savings”. In a statement, Clarien said it will continue to review lending and deposit rates and make adjustments as needed “to ensure it provides a superior range of financial planning solutions for its diverse range of clients”. An HSBC spokesperson said: “HSBC Bermuda considers multiple factors [including but not limited to, the Fed rates], in our ongoing reviews of the Bank’s lending and savings rates. Any impact on the rates will be communicated through our usual channels.” Butterfield Bank said anyone seeking information regarding rates and payment terms should contact its Consumer Credit department on 298-4799. Information regarding Clarien Bank rates is available at clarienbank.com.
2018. August 9. A new class of banking licence being introduced in Bermuda could address a hurdle that has crimped the progress of fintech and blockchain business around the world. What form the solution will take in Bermuda has yet to be established. However, there are clues in a limited number of countries and jurisdictions that have similarly looked to introduce a workable interface between blockchain-based companies, including those involved in digital currencies and tokens, and traditional banking services. In Switzerland there are about 200 blockchain-based companies in and around the small town of Zug. While the country has been embracing the idea of becoming a “crypto nation”, it is grappling with the issue of how to provide banking facilities for blockchain and cryptocurrency companies. As a consequence, many of those start-ups have had to look elsewhere for banking services. Some have turned to the tiny European principality of Liechtenstein, where Bank Frick has introduced direct crypto investment in the leading cryptocurrencies of bitcoin, bitcoin cash, litecoin, ripple and ether. It has also helped more than 20 initial coin offering projects establish traditional bank accounts. Fidor Bank in Germany, and Swiss private banks Vontobel and Falcon Bank, have also agreed to handle cryptocurrency-based investments. Tokenpay, a blockchain-based payment platform registered in the British Virgin Islands which has banking operations, has partnered with Swiss-based blockchain asset management service company Coinlab Capital. But generally, there are few options around the world for crypto-related banking, due to regulators and major banks being reluctant to enter the field. The likes of JP Morgan and Goldman Sachs have listed cryptocurrency and related technology as potential risk factors, although Goldman Sachs has also said it is planning a crypto-custody offering. HSBC is reportedly monitoring and “cautiously looking” at cryptocurrency use. The high volatility of cryptocurrencies is another reason why many large banks are sitting on the sidelines. In the UK some banks ban customers from using their credit cards to speculate on cryptocurrencies. The potentially crippling wild swings in valuations have been well illustrated by bitcoin, the world’s biggest cryptocurrency, which touched $19,700 in December but had fallen to $6,300 yesterday. Bermuda’s established banks have shown no appetite for providing banking services linked to cryptocurrencies and distributed ledger technology. The Bermuda Bankers’ Association reportedly explained to the Bermuda Government that this reticence was due to the financial institutions’ “ongoing need to manage their risks to continue to operate in accordance with their existing correspondent banking relationships”. It is against this backdrop that the Government last month tabled the Bermuda Monetary Authority Amendment (No 2) Act 2018, and the Banks and Deposit Companies Amendment Act 2018. In a prelude to the tabling of the Bills, David Burt said: “In the wake of the global financial crisis and the ever-broadening risk mitigation strategies, banks are increasingly risk-averse. While that is understandable, as given their risk tolerances, to date local banks have been unwilling to offer services to newly incorporated fintech and distributed ledger technology companies.” The Premier said securing banking services has been the greatest challenge for the fintech industry in Bermuda and elsewhere, and the legislation will allow for a new class of bank that will provide banking services to Bermuda-based fintech companies. As of last month Bermuda had 21 fintech companies incorporated on the island, and a similar number are waiting to do so, according to Mr Burt. When the two Bills reached the Senate at the end of last month, Vance Campbell, a government senator, was asked if any banks had been identified that would take advantage of the new class of licence. He said: “While we know that there are banks globally that do provide banking services for the fintech industry we have not identified a specific bank here.” With a number of countries and jurisdictions grappling with the same challenge and looking to lead the way with a solution likely to bring more fintech business their way, time is of the essence, noted Heinz Tännler. The finance director of the Zug canton in Switzerland said it was hoped that the relationship between crypto companies and banks in Switzerland would be clarified by the end of this year. “Time is pressing — other jurisdictions such as Malta and Singapore are very active and making a lot of effort to attract these companies. The lack of access to bank services is a significant competitive disadvantage,” Mr Tännler said in an interview with The Financial Times. Mr Burt takes a similar view. While acknowledging that the island’s traditional banks have played their part in the community over the years, he said to survive and grow businesses must evolve and innovate. He added: “Legacy industries the world over have lost that ability and the future belongs to those who can quickly lay a foundation for growth, respond to emerging trends and preserve a reputation for sound management in the process. For countries it is no different, Bermuda must be nimble or we will be left behind.”
2018. July 28. MPs approved a new type of banking licence to cater to Bermuda’s fintech industry last night. David Burt, the Premier and Minister of Finance, told the House of Assembly that the restricted licence would allow fintech companies access to a Bermuda bank account and the chance to be part of the island economy. He said: “Despite the robust regulations put in place, to date our four local banks have been unwilling to offer services to newly incorporated fintech and distributed ledger technology companies. This is a problem that we must fix or else Bermuda will not be able to realize the possibility of economic growth that can come from a fintech industry on our shores.” Mr Burt added: “This Government believes that fintech companies that are licensed to participate in legal business ventures in Bermuda should not be treated differently and should not be shut out from participating fully in the local economy. It was therefore incumbent on this Progressive Labour Party government to find a solution to this problem.” Mr Burt said the amendments to the Banks and Deposit Companies Act 1999 would solve the problem. Jeanne Atherden, the Leader of the Opposition, the One Bermuda Alliance, asked how many banks would be set up under the restricted licence. Mr Burt said the number of banks would be driven by market demand. Cole Simons, the Shadow Minister of Education, backed the Bill but emphasized the need for it to be implemented in a manner that is “measured, intentional and acceptable by the regulators and industry so that our banking fraternity is not compromised and that we can still go to the international markets knowing that our banking industry is first-class, reputable and functional”. Mr Simons said he was also concerned “that we may be traveling too quickly in that we are over-promising and under-delivering”. He added some interested parties said the concept was right but were not satisfied that all the regulations and safety precautions were in place. But Wayne Caines, the Minister of National Security said: “Yes, we are moving at a rapid pace but the steps are deliberate. The steps are consultative and they are in keeping with global best practices.” Kim Swan, a PLP backbencher, spoke in support of the Bill and encouraged opponents of a fintech industry to look at the opportunities it presented. Chris Famous, also a PLP backbencher, said innovation was important. He added that Bermuda’s strides in the fintech industry had been praised by finance ministers from across the Caribbean at the recent Caricom conference in Jamaica.
2018. June 29. The Bermuda Government’s fintech plans have met “understandable resistance” from banking, David Burt told the House of Assembly today. The Premier spoke of the need to resolve the issue surrounding the new fintech which has been attracted to the island in recent weeks. He said legislation to create a “new class of bank” will be brought to the House to provide banking services to Bermuda-based fintech companies. Restrictive banking licenses will be introduced, and consultation has begun on expanding the types of banks that can operate in Bermuda to serve the public. “Bermuda must be nimble, or we will be left behind,” Mr Burt said, calling the proposals “critical”. The Premier said: “Yesterday afternoon, because this Government believes in consultation, I convened a meeting with the Bermuda Banking Association at the Ministry of Finance and I have their support.” He added: “The fact is that local banks do not currently have the risk appetite to accept persons in the digital asset space.”
2018. June 13. Clarien Bank said today it would raise its Bermuda dollar mortgage rates by quarter of a percentage point, while Butterfield will increase Bermuda dollar corporate loans and US dollar loans by the same amount. The announcements came after the US Federal Reserve said it would raise its influential fed funds rate by quarter of a point. Clarien said the Bermuda dollar base rate for personal mortgages would increase from 4.25 per cent to 4.5 per cent and from 4.5 per cent to 4.75 per cent for commercial mortgages, effective tomorrow. Butterfield said its base rate for Bermuda dollar corporate loans and US dollar loans will increase from 5.25 per cent to 5.5 per cent, effective Friday. However Butterfield said it would not increase Bermuda dollar residential mortgages or consumer loans. Clarien added: “The bank is issuing notices to all lending clients regarding their repayment details. “We continue to work with all of our clients on a regular basis to understand their current financial position, and encourage clients to contact their lending officer to discuss the changes to their repayment terms.” Butterfield urged customers seeking more information to contact the bank’s Consumer Credit department on 298-4799 or their relationship managers. Both Clarien and Butterfield will also make some rate increases to deposit products.
2017. June 26. Home-grown Bank of Butterfield has outstripped global giant HSBC to become Bermuda’s biggest bank. Butterfield was listed as having assets of $11.1 billion last year, compared to $8.7 billion for HSBC Bermuda, overtaking its rival by a sizeable margin. A KPMG report into the state of the island’s banking industry said: “The change in position arose as Butterfield completed their acquisition of HSBC’s private banking operations in April 2016.” But the banking sector as a whole in Bermuda shrunk by around $1.49 billion last year, a 6 per cent drop. Clarien Bank had more than $1.1 billion in assets in the same period, while Bermuda Commercial Bank’s assets totaled a little over $649 million. Net profits across the industry went up by $26 million, some 15 per cent compared to 2015.The details were revealed in the latest Bermuda Banking survey carried out for KPMG’s Insights magazine. Craig Bridgewater, head of banking at KPMG in Bermuda, said: “Six per cent is not a big number and what’s happened is there have been some movements in the industry.“ HSBC sold its private banking to Butterfield and Butterfield is restructuring its business." He added: “From time to time, customers may move funds around in the nature of their business — large reinsurance claims could see funds leave banks. ”Mr Bridgewater said that since the Insights survey was first produced six years ago, regulation of the sector had increased. He said that the impact of stricter regulation had been a major topic in the Insights round table featuring the heads of the four island banks. “Customer experience remains of paramount importance and investment in technology enablement has the potential to benefit the business, employees and customers.” According to the survey, despite the drop in assets the banking sector remained stable. "The cost-to-income ratio, a key performance indicator for the productivity and efficiency of banks, has remained in line with the five-year average." Mr Bridgewater said: “Clearly, there is the regulatory environment and that continuously becomes more of a challenge. I don’t see any weakness in there so far — they have been able to absorb these challenges.” He added: “It has been an eventful year for Bermuda’s banking sector. Butterfield listed on the New York Stock Exchange, HSBC sold their private banking operations, BCB moved into its new premises and Clarien received a significant capital injection.” HSBC reported $117 million in profits for 2016, up $34 million, or 34 per cent, compared to the previous year. Butterfield made $116 million profits over the same period up $37.8 million, or 48 per cent, compared to 2015.Clarien Bank ended the year with $1.2 million in net profits, more than double the 2015 figure, while BCB had a net loss $6.63 million, put down to poor performance of investments, as well as currency depreciations as result of the fall in sterling after the UK voted to leave the European Union.
Banks are listed by size, not in alphabetical order.
The Bank of N. T. Butterfield & Son Limited. 65 Front & Reid Streets, Hamilton HM 12. Phone 295-1111. About 38% of the local banking market. Like all local banks, charges a monthly checking account fee.
2018. October 25. More than $600 million was wiped off the value of Butterfield Bank as its share price tumbled on The New York Stock Exchange. Investors were rattled by a sharp decline in deposits at the bank, and lower expectations of revenue from the banking custody business it has acquired from Deutsche Bank. The bank’s shares stood at $51.15 when the US market closed on Tuesday, but within half-an-hour of the NYSE reopening yesterday they had plummeted more than 25 per cent to $35.84. Later on, the stock staged a partial recovery to end the day at $39.51. What changed between Tuesday evening and yesterday morning was the release of Butterfield’s third quarter results. The bank made a profit of $50.4 million for the three months to the end of September. That was about $10 million more than in same period last year. The profit equated to 90 cents per share, which missed analysts’ estimates by five cents. Michael Collins, chief executive officer, noted the bank’s “strong results” from its core businesses. However, in a conference call held against the backdrop of the tumbling share price yesterday, questions were asked about the drop in average customer deposit balances to $9.4 billion, a fall of $300 million year-on-year and $700 million lower than during the second quarter. “We have been pretty consistent about talking about the volatility of some of our trust and hedge fund clients, and this is exactly what this represented,” said Mr Collins. “We have one client that represents over half of the decline. They have put the money to work somewhere else.” He pointed out that the bank was not seeing rate sensitivity in its core base of retail, commercial and corporate clients, but there was volatility “at the top end”. Michael Schrum, chief financial officer, explained that from time to time big deposits go on and off the balance sheet. He said when there is a distribution from a trust the client might “park it for a bit and then go off and start a new fund or buy a new property”. He added: “We are at a low point with the dozen or so clients that represent that top bit. There are specific deposits that, given they are in a fund, are probably not going to come back. But from time to time we will get others that come back to the balance sheet. Those very important clients are still very important for the trust business; the relationships are still with us, they are just doing other things with their money, and it is not rate-related.” Butterfield has also lowered its revenue expectations for the banking custody business in the Cayman Islands and Channel Islands that it acquired from Deutsche Bank this year. Dan Frumkin, chief operating officer, said his previous projection for revenue of $30 million from the acquired business is likely to be closer to $17 million or $20 million. However, he said expenses are also likely to be lower than previously reckoned, around $12 million, which would be $2 million to $3 million lower than initially estimated. He said the bank was therefore now looking at a total contribution between $8 million to $11 million “once it is bedded in towards the tail end of next year,” compared with the initial thought that the figure might be around $16 million. “The balances are lower than we expected, we are disappointed by that,” he said. “The reality is it is still a very accretive transaction, and it opens up the Jersey market. We are excited about the opportunities we have in that market. We are still pleased with it, it’s just not quite what we thought it was.” There was a jump in non-interest expenses to $82.2 million, which was up from $78.2 million in the previous quarter, and $8.5 million higher than a year ago. This increase was said to be primarily due to severance costs of $2.4 million associated with management restructuring. Mr Collins said: “Over half of some of the expense increase was 23 redundancies, pretty senior redundancies in all three or four of our jurisdictions, pretty much spread evenly. It is something we will continue to do every year or two as we think about our cost base.” Following the share price fall, Butterfield Bank has a market capitalization of $2.18 billion. Butterfield’s share price remained unchanged at $50 on the Bermuda Stock Exchange.
2018. October 23. Butterfield Bank made a profit of $50.4 million in the third quarter, but missed analysts’ expectations. The profit equated to 90 cents per diluted share, five cents lower than the predicted estimate of a consensus of market analysts. It was $10.3 million higher than for the same period a year ago. Michael Collins, Butterfield’s chief executive officer, said: “During the third quarter, we continued to generate strong results from our core businesses, capital efficient non-interest income and higher loan balances. Expense management is a priority for us, particularly as we integrate the previously announced acquisitions. Our strategy continues to generate industry leading returns with an attractive risk profile. We remain focused on pursuing additional growth through accretive acquisitions of trust businesses and banking in existing jurisdictions.” Core net income was $49.1 million, or 88 cents per share. There was a jump in non-interest expenses to $82.2 million, which was up from $78.2 million in the previous quarter, and $8.5 million higher than a year ago. This increase was said to be primarily due to severance costs of $2.4 million associated with management restructuring, and a $700,000 expense related to setting up a new bank in Jersey. As it announced its results, the bank said David Zwiener has decided to retire from the board. He has served as a director since August 2016, and as lead independent director since July last year. James Burr, who has been a director since June 2016, has been appointed lead independent director. Mr Collins thanked Mr Zwiener for his “guidance and dedication to the interests” of board and shareholders and wished him luck in his future endeavors. He added: “I am pleased that Jim Burr has agreed to serve as lead independent director. Jim has a longstanding relationship with the bank, and his financial expertise has made him a valuable member of Butterfield’s board.” Butterfield’s net interest income and net interest margin both improved in the third quarter, while average customer deposit balances were $9.4 billion, a drop of $300 million year-on-year, and down $700 million on the second quarter. Butterfield has $44.3 million of non-performing loans as of the end of September, compared with $43.9 million at the end of 2017. It said it “continues to engage proactively with clients who experience financial difficulty”. The bank’s investment portfolio stood at $4.6 billion at the end of last month, down $100 million since the start of the year. It has total net unrealized losses of $121.8 million, compared with unrealized net losses of $19.2 million at the end of 2017 — the bank said the increase is largely attributable to rising treasury rates this year. Return on average common equity was 23.2 per cent. Butterfield’s capital ratio at the end of September was 23.3 per cent, as calculated under Basel III. The bank has declared an interim dividend of 38 cents per share to be paid next month. Butterfield currently has board approval to repurchase up to one million shares for capital management. During the third quarter it did not repurchase any common shares. Ahead of the earnings report, Butterfield Bank’s shares closed at $51.15, down 59 cents, on the New York Stock Exchange.
2018. February 15. Butterfield Bank has agreed to buy Deutsche Bank’s banking businesses in the Cayman Islands, Jersey and Guernsey — a deal that could increase its deposit base by about one fifth. The news came as the Bermudian-based bank declared net income of $40.3 million for the fourth quarter of last year, which completed a year of record profits of $153.3 million for the bank, up from $115.9 million in 2016. Further good news for shareholders came with a 19 per cent hike in the quarterly dividend payment to 38 cents per share and the announcement of Butterfield’s plans to buy back up to one million of its own shares. “I am pleased to report that Butterfield achieved record profits in 2017,” said Michael Collins, Butterfield’s chairman and chief executive officer. “These strong results were driven by our specialized banking and wealth management businesses that generate consistent fee income and an expanding net interest margin that benefited from our efficient deposit franchise and a rising rate environment. We delivered core net income of $158.9 million, up $20.3 million or 14.6 per cent year-on-year, and a core return on average common equity of 19.7 per cent, driven by strong performances in our core banking markets, as well as strong growth in our UK mortgage business.” The deal with Deutsche Bank is the second acquisition Butterfield has made from the German financial-services giant after it agreed last October to buy the company’s Global Trust Solutions business. “The GTS integration process is well under way and anticipated to close early in the second quarter of 2018, ahead of plan,” Mr Collins said. “We are pleased that over 90 per cent of the staff have now accepted employment agreements with Butterfield. This morning we announced that we have reached a second agreement with Deutsche Bank to acquire their banking businesses in the Cayman Islands, Guernsey and Jersey. We are very excited about this acquisition as it could increase our deposit base by about 20 per cent once integrated. It will help us establish a foothold in Jersey, an attractive banking market, as well as increasing our scale and market share in Cayman and Guernsey. The customer base has a very similar profile to our existing banking business and we look forward to welcoming the new relationship teams and their clients to the Butterfield Group.” Results for the fourth quarter of 2017 included lower credit costs with a release of provision for credit losses of $5.4 million compared with a release of provision for credit losses of $0.9 million in the fourth quarter of 2016. In the fourth quarter of 2017 the provision release was partially offset by $2.5 million of valuation loss adjustment on a foreclosed property included in other real estate owned.
2017. December 14. Butterfield Bank today announced that it would raise lending rates and its fixed-term deposit rates for savers after the US Federal Reserve’s rate hike yesterday. Clarien Bank said yesterday that it also plans to raise rates for savers and borrowers, with details to be released next month. HSBC Bermuda said yesterday that any impact on rates would be communicated “through our usual channels” after the US central bank raised its key Fed Funds rate target by quarter of a percentage point. Butterfield said: “To provide customers with the opportunity to earn higher returns on Bermuda dollar and US dollar deposits, rates paid on six-month fixed-term deposits will increase by 0.35 per cent, and rates paid on one, two, three, four and five-year fixed-term deposits will increase by 0.5 per cent. “Changes will be effective December 14 and detailed deposit rate information will be available online and at Butterfield banking centres from Monday, December 18.” Butterfield’s borrowers will see an increase in their interest payments in the coming months. The bank said its base rate for Bermuda dollar residential mortgages and consumer loans will increase from 4.5 per cent to 4.75 per cent. The base rate for Bermuda dollar corporate loans and US dollar loans will increase from 4.75 per cent to 5 per cent. The rate increase on loans takes effect immediately. The rate increase on residential mortgages will take effect on March 18, 2018. Butterfield added: “With respect to the rate adjustments announced today, qualifying floating-rate mortgage holders may opt to maintain current payment amounts by extending mortgage terms.” For more information on rates and payment terms, customers can contact Butterfield’s Consumer Credit department on 298-4799 or their relationship managers. An HSBC Bermuda spokesperson said: “HSBC Bermuda considers multiple factors (including but not limited to, the Fed rates), in our ongoing reviews of the bank’s lending and savings rates. Any impact on the rates will be communicated through our usual channels.”
2017. October 26. Butterfield Bank will have a presence in two new jurisdictions next year when it completes its planned acquisition of Deutsche Bank’s Global Trust Solutions business. Of particular note is the expansion opportunity into Singapore. Asia is viewed as a growth market for the bank. “Having a platform in Singapore will allow us to grow,” said Michael Collins, the bank’s chairman and CEO. During an earnings conference call only hours after the planned acquisition was announced yesterday, he said: “Singapore is obviously a market we have wanted to get into for a long time. And it goes back historically to our trust business from a lot of the Hong Kong families. So having a presence there is really important.” Butterfield has entered into an agreement to acquire GTS, excluding its US operations, from Deutsche Bank, presently in the process of being merged with a Cologne-based entity. Upon completion of the transaction, which is subject to regulatory approvals, Butterfield will take over the ongoing management and administration of the GTS portfolio, comprising of approximately 1,000 trust structures for some 900 private clients. The bank is offering positions to about 90 employees who are fully dedicated to GTS in the Cayman Islands, Guernsey, Switzerland, Singapore and Mauritius. While the terms of the agreement have not been disclosed, there are some clues about the scale of the deal. Mr Collins said the purchase price is under $50 million, and the new trust business was about 20 to 25 per cent the size of the bank’s existing trust business. At the end of September, Butterfield Trust had assets under management of approximately $95.2 billion. The Singapore platform that Butterfield will acquire is understood to have about 15 staff, and will generate about 20 per cent of the additional trust business revenue. Butterfield will partner with Deutsche Bank to provide trust solutions to German bank’s clients on an ongoing basis. In a statement, Mr Collins, said: “Trust is a core business for us, and the acquisition of the Deutsche Bank Global Trust Solutions business enables us to add scale and professional bench strength to our trust operations in Switzerland, Guernsey and Cayman. It also provides us with a physical presence in Asia, which we view as a growth market for Butterfield. We look forward to welcoming GTS clients and staff to Butterfield and to the development of new business from an ongoing partnership with Deutsche Bank’s wealth management team.” Deutsche Bank, which is headquartered in Frankfurt, is one of the world’s largest banks by total assets. Its wealth management business is also one of the largest in the world, with client assets of around €299 billion. Referring to the announced acquisition, Fabrizio Campelli, Deutsche Bank’s global head of wealth management, said: “Butterfield is a well-known leader in the trust industry and we look forward to working with them to provide our clients with a broader product offering. The divestiture represents an important step in our strategy of simplifying our business and positioning wealth management for growth in our core markets.” Outside Bermuda, Butterfield has operations in Cayman Islands, The Bahamas, Britain, Guernsey and Switzerland. Mr Collins said the acquisition of GTS ticked a number of boxes for the bank, such as being at least two-thirds private trust business. “We are less interested in, or not interested in, fund administration and company secretarial works and that sort of stuff. This is obviously 100-per cent private trust,” he explained during a question and answer portion of yesterday’s conference call. "It was important for the locations to be in the bank’s existing jurisdictions where it has scale — which is the case with GTS, with the exception of Singapore and Mauritius. We expect it to generate stable trust fee income for the bank and be accretive once integrated.” It is the fourth significant acquisition for the bank since 2014. The transaction is expected to close in the first half of 2018, subject to customary closing conditions.
2017. October 25. Butterfield Bank has reported a profit of $41.1 million for the third quarter, up $5 million on the previous three months. The results were released this morning, along with news that the bank is to acquire Global Trust Solutions from Deutsche Bank. While Butterfield’s net income for the quarter was $41.1 million, core net income was $40.7 million, or 73 cents per share, up $3.2 million on the previous quarter. In the same quarter last year, Butterfield’s core net income was $33.4 million, or 60 cents per share. Michael Collins, chairman and CEO of Butterfield Bank, said: “Butterfield delivered solid results this quarter as lending margins improved and expenses began to return to a more normal level. We are also pleased to announce an agreement to acquire the Global Trust Solutions business from Deutsche Bank. This acquisition will add scale and talent to our existing trust operations in Switzerland, Guernsey and Cayman and add a profitable and strategically important private trust platform in Singapore. We expect it to generate stable trust fee income for the Bank and be accretive once integrated.” The agreement to acquire Deutsche Bank’s Global Trust Solutions business, excludes its US operations. Terms of the agreement have not been disclosed. Upon completion of the transaction, which is subject to regulatory approvals, Butterfield will take over the ongoing management and administration of the GTS portfolio, comprising approximately 1,000 trust structures for some 900 private clients. With client assets of around 299 billion euros, Deutsche Bank’s wealth management business is one of the largest wealth managers worldwide. Butterfield is offering positions to all employees who are “fully dedicated to GTS in the Cayman Islands, Guernsey, Switzerland, Singapore and Mauritius”. And in a statement, Butterfield said it will partner with Deutsche Bank to provide trust solutions to Deutsche Bank’s clients on an ongoing basis. The acquisition is expected to close in the first half of 2018. Mr Collins said it was the fourth significant acquisition for the bank since 2014 and was consistent with the strategy to grow by acquiring complementary businesses in select jurisdictions. Announcing its third quarter results, the bank has declared an interim dividend of 32 cents per share to be paid on November 27. Butterfield’s improved profit was attributed to a number of factors, including a $2.8 million increase in net interest income before provision for credit losses, principally from interest earned on loans from slightly increased volumes and a full quarter’s impact of repricing. There was a $1.2 million decrease in provisions for credit losses, and a $500,000 decrease in non-interest income. Marketing costs fell by $1.5 million, due principally to a decrease in America’s Cup-related marketing initiatives. There was also a $1 million decrease in the remaining non-interest expense items, due to lower America’s Cup-related premises improvement costs, a decrease in restructuring costs and lower board of directors-related expenses. The bank reported a $800,000 increase in professional and outside services costs, due principally to $1.1 million of noncore expenses associated with potential acquisitions. Butterfield’s total assets were $10.6 billion at the end of September 2017, down $500 million from December 31, 2016. The loan portfolio totaled $3.7 billion at the end of the quarter, approximately flat from year-end 2016. The bank said paydowns in commercial lending were offset by new residential mortgages loans. Allowance for credit losses at totaled $42 million, a decrease of $2.3 million from the end of 2016. Butterfield’s return on average assets for the third quarter was 1.5 per cent, up from 1.3 per cent in the second quarter and 0.9 per cent in the third quarter of 2016. The core return on average tangible common equity was 22.2 per cent, up from 21.6 per cent in the previous quarter and 19 per cent a year ago. in the third quarter of 2016. Meanwhile, the core efficiency ratio for the third quarter of was 62.8 per cent compared with 66.1 per cent in the previous quarter and 65.3 per cent in the third quarter of 2016. Net interest income for the third quarter was $74.3 million, up $2.8 million on the previous three months, and $9.3 million higher, year-on-year. The bank said improvements were driven by higher yields on the investment portfolio and on the adjustable-rate loan portfolio. Net interest margin was 2.81 per cent, up 15 basis points from 2.66 per cent in the previous quarter and 42 basis points higher than the 2.39 per cent in the third quarter of 2016. Improvements were said to have been driven by increases in net interest income and deposit costs which decreased slightly to 10 basis points from 11 basis points in the previous quarter. Results for the third quarter included a release of provision for credit losses of $0.7 million compared with a provision for credit losses of $0.5 million in the previous quarter and a provision for credit losses of $0.3 million a year ago. Non-interest income was $38.2 million, compared with $38.7 million in the previous quarter and $36.3 million in the third quarter of 2016. Non-interest expenses were $73.6 million, compared with $75.3 million in the previous quarter and $77.3 million in the third quarter of 2016. The bank stated that non-interest expenses are expected to continue to normalize over the next quarter as various temporary expenses abate. Butterfield’s total capital ratio as at 30 September was 19.9 per cent as calculated under Basel III. This compares with 17.6 per cent as of December 31. Both of these ratios are significantly above regulatory requirements.
2017. October 25. Butterfield Bank has entered into an agreement to acquire Deutsche Bank’s Global Trust Solutions business, excluding its US operations, it announced this morning. Terms of the agreement have not been disclosed. Upon completion of the transaction, which is subject to regulatory approvals, Butterfield will take over the ongoing management and administration of the GTS portfolio, comprising of approximately 1,000 trust structures for some 900 private clients. Butterfield is also offering positions to all employees who are fully dedicated to GTS in the Cayman Islands, Guernsey, Switzerland, Singapore and Mauritius. This will ensure continuity of service for clients. Butterfield will partner with Deutsche Bank to provide trust solutions to Deutsche Bank’s clients on an ongoing basis. Michael Collins, Butterfield’s chairman and chief executive officer said: “Trust is a core business for us, and the acquisition of the Deutsche Bank Global Trust Solutions business enables us to add scale and professional bench strength to our trust operations in Switzerland, Guernsey and Cayman. “It also provides us with a physical presence in Asia, which we view as a growth market for Butterfield. We look forward to welcoming GTS clients and staff to Butterfield and to the development of new business from an ongoing partnership with Deutsche Bank’s wealth management team.” With client assets of around 299 billion euros, Deutsche Bank’s wealth management business is one of the largest wealth managers worldwide. Fabrizio Campelli, Deutsche Bank’s global head of wealth management, said: “Butterfield is a well-known leader in the trust industry and we look forward to working with them to provide our clients with a broader product offering. The divestiture represents an important step in our strategy of simplifying our business and positioning wealth management for growth in our core markets.” Butterfield has been providing trust and fiduciary services to international clients for more than 80 years. Its award-winning trust business comprises more than 200 professionals based in the Bahamas, Bermuda, Cayman Islands, Guernsey and Switzerland, who provide estate and succession planning services, efficient co-ordination of family affairs, and administration of complex holding structures for a wide variety of financial and non-financial assets. As of 30 September, 2017, Butterfield Trust had Assets Under Administration of approximately $95.2 billion. The transaction is expected to close in the first half of 2018, subject to customary closing conditions.
2017. October 7. A former top executive of the US Central Intelligence Agency has joined the board of Butterfield Bank. Meroe Park has been appointed as a non-executive director. She was most recently the executive director of the CIA, serving as the agency’s chief operating officer in its most senior career post. Prior to her retirement from the CIA in June, Ms Park was a 27-year career intelligence officer and one of the US Government’s leading professionals. She held increasingly senior positions at the CIA, including chief of human resources and a senior mission support officer for locations in Eurasia and Western Europe. Ms Park successfully led key strategic initiatives, including the modernization of the CIA’s technology systems and organizational structure, and the implementation of talent initiatives focused on workforce development and inclusion. Ms Park earned a number of awards during her career, and has twice been the recipient of the Presidential Rank Award, the Executive Branch’s highest honor for Government career professionals. She holds a Bachelor of Science degree from Georgetown University. Michael Collins, Butterfield’s chief executive officer, said: “On behalf of my fellow directors, I am excited to welcome Meroe to the Butterfield board. Meroe’s leadership skills and unique geopolitical perspective, developed over nearly three decades of domestic and international experience with the CIA, will help support our growth in high quality international financial centers. I look forward to working closely with Meroe and our other directors as we continue to build shareholder value.”
2017. August 18. Butterfield Bank is confident it will return its operating expenses to its target level by the end of the year. And while it has twice raised its lending rates this year, in line with moves by the US Federal Reserve, it has no declared intention on what it will do if there is a further hike by the Fed. Regarding expenses, the bank has a 60 per cent efficiency ratio target for the end of 2017. However, between March and the end of June it went off target. Its non-net interest expenses rose to $75.3 million, about $9.5 million higher year-on-year. Part of the reason for the blip was the impact of the 35th America’s Cup. The bank was an official supplier and official Bermuda bank of the event, and it hosted more than 800 guests and clients during the sailing competition in May and June. Michael Collins, chief executive officer has previously described the one-time expenditures as yielding “unparalleled opportunities for business development and retention”. And during a conference call following the release of the bank’s quarterly results last month, he said expenses had been driven by “marketing for the America’s Cup, Sarbanes Oxley, investment in compliance systems and capabilities and the build-out of our Halifax, Nova Scotia Support Centre”. Mr Collins said that the America’s Cup expenses were non-recurring, while the costs of Sarbanes Oxley, a US Act which relates to management and accounting, and investment in compliance systems had picked up in the second quarter “but should start to level off by the end of 2017”. He added: “Expenses related to the Halifax build-out will likely continue through the end of the year, before fading in early 2018, and thereafter will start to create operational efficiencies for the group.” Butterfield is moving some middle-office functions and back-office departments to its service centre in Halifax, Canada. Mr Collins said: “We continue to be very focused on expenses and expect to show significant progress by the end of the year as projects conclude and we achieve the anticipated savings.” During the second quarter, the bank’s net interest income increased $3.6 million over the prior quarter. Michael Schrum, chief financial officer, said: “The increase was due mainly to improving yields on the Bermuda and Cayman mortgage books, as adjustable rates began to reset following the recent Fed rate moves.” On the question of how the bank might react to future Fed rate hikes, Daniel Frumkin, chief risk officer, noted that Butterfield had passed along the March and June rate rises to its Bermuda mortgage customers. But he added: “We don’t have any forward-looking view of what we’ll do on the next rate rise.”
2017. May 11. Butterfield Bank is aiming to cut operating costs as it moves some middle-office functions and back-office departments to its service centre in Canada. It is expected that this will allow the bank to reduce its expenses in Bermuda and Cayman. There has been no announced impact on jobs in Bermuda, but the bank acknowledges the ongoing changes “may involve the redefinition and relocation of select roles to Halifax”. Favorable tax treatment is a carrot for the bank to create more jobs in Nova Scotia. Butterfield has a service centre in Halifax, where it employs about 35 people. Last month it amended a six-year agreement it made in December 2015 with Nova Scotia Business Inc, increasing the projected number of jobs it will create in the province from 50 to 100. By doing so, the bank is qualified to earn up to $1.7 million through payroll tax rebate over the six years of the agreement. However, that amount will be lower if it creates fewer than 100 jobs in Nova Scotia. Halifax is about 40 or 50 per cent less expensive than Bermuda and Cayman, according to Michael Collins, Butterfield’s chief executive officer. When asked by The Royal Gazette if jobs will be lost in Bermuda as a result of building up its operations in Halifax, a spokesman said the middle-office positions for which it is presently hiring in Halifax are primarily additions to the overall headcount of the group. The new positions are said to reflect investment in regulatory compliance and administration. However, the bank is expecting cost savings in the second half of this year, with a reduced salaries bill being a key component. In a presentation to accompany its first quarter earnings, Butterfield showed how salary and other employee benefits totaled $36 million from the start of January to the end of March. That was $1.8 million, or 5.3 per cent higher than the proceeding quarter, and $4.5 million more than the first quarter of 2016. During an earnings conference call with analysts on April 26, Mr Collins was asked about the higher expenses. He said it was caused by two things: one was continuing compliance work “which all banks are doing”, the other was operating and employee costs. “There’s a bit of cost overlap in terms of building our Halifax service centre, so as we continue to move middle-office functions and non-client-facing departments and positions to Halifax, obviously we have to staff up in Halifax before we start reducing expenses in Bermuda and Cayman.” Mr Collins said the bank would start to see savings in the second half of the year as a result of its Halifax operations, and noted: “Bermuda and Cayman are very expensive jurisdictions. Halifax is about 40 per cent or 50 per cent less expensive, and also [has] a very good talent pool, so we’re very excited about that.” During the same discussion, Michael Schrum, Butterfield’s chief financial officer, said the bank’s renegotiation of its contract with outsource IT provider HP Enterprise, was bringing net cost savings of $4 million annually. He said other cost savings will be “primarily on salaries” in the second half of the year. Butterfield’s Halifax operations range from finance to human resources, middle office and administration. The bank’s spokesman said: “As the bank continues to expand in Bermuda, Cayman and Guernsey, and as banking regulations and technology evolve, we will assess the back-office and middle-office functions that support our client businesses, making adjustments to maximize efficiency and enhance customer service. This may involve the redefinition and relocation of select roles (based in Bermuda, the Cayman Islands and elsewhere within the group) to Halifax.”
2017. April 7. The Bermuda Stock Exchange has this year launched its “Own Your Share of Bermuda” campaign to raise awareness of opportunities to invest in the island’s public companies. The Royal Gazette is supporting the effort by publishing weekly features on each of the 13 domestic companies listed on the BSX. In the fifth of the series, Jonathan Kent looks at Butterfield Bank. Butterfield Bank may be in its 160th year in business, but in 2017 it is effectively embarking on a new era. Having been brought to its knees by the impact of the US subprime mortgage crisis nearly a decade ago, Butterfield can claim to have finally put that painful episode behind it after a pivotal last 12 months. It was a year when the rescuers of the bank — those who invested in $200 million of preference shares issued in 2009 and the institutions that ploughed $550 million into the bank a year later — got their money back with a tidy profit. And on a momentous day in September, the bank launched a successful initial public offering of shares on the New York Stock Exchange, with chairman Barclay Simmons, chief executive officer Michael Collins and Michael Dunkley, the Premier, on hand to ring the opening bell on Wall Street — not to mention a troupe of Gombeys on the trading floor. “With these events behind us, I believe Butterfield has emerged fully from the impact of the global financial crisis and is well placed to benefit from economic growth in our key markets,” Mr Simmons stated in Butterfield’s 2016 annual report. From an investor’s viewpoint, there are many promising signs to note in recent years, including increasing earnings, a rising share price and acquisitions that will boost future earnings capacity. Full-year net income in 2016 was $115.9 million, up $38.2 million on the year before. Both interest and non-interest income rose last year and the prospects for further gains look good in an rising interest-rate environment. Twice in the last four months, Butterfield has raised its base rate for residential and commercial lending in line with quarter-point hikes by the US Federal Reserve. And with the Fed signaling two or three more increases this year alone, that should translate into improving margins for the bank. While that will not be popular with borrowers, it’s certainly good news for shareholders. The bank declared a quarterly dividend of 32 cents per share for the fourth quarter of last year — tripling the payout to shareholders from the same period a year before. Going forward, that translates into an attractive 4.1 per cent yield on the current share price of $31.50. Since the crisis, the bank has cleaned up its loan portfolio — of which non-performing loans made up just 1.6 per cent as of the end of last year — and has made strides towards its strategic aim of becoming “the leading independent offshore bank and trust company”. Acquisitions over the past three years have included a trust business in Guernsey, banking operations in Cayman and last year, the private banking investment management and trust businesses of HSBC in Bermuda. While retail banking remains a key part of its business and a generator of the deposits that make up much of Butterfield’s $4.4 billion investment portfolio, Mr Collins sees the greatest opportunities ahead in catering to wealthier types. As the CEO stated in the annual report: “Our mission is to build relationships and wealth as a trusted adviser to generations of mobile, high-net-worth families moving capital around the world.” And he made no secret that the bank is on the lookout for further acquisitions that will fit with its growth objectives. “We continue to see opportunities to acquire offshore trust companies, with large international banks exiting certain jurisdictions and smaller firms sensing their vulnerability as the industry consolidates,” Mr Collins said. While investors who have bought into the bank in recent years have done very well, longer-term shareholders still have a long way to go to recover the paper value they once had. Ten years ago today, Butterfield shares were trading at $59 on the BSX. Taking into account the stock splits since then, today’s share price is down by about 84 per cent from that day. Hundreds of millions of dollars were lost on the bank’s investments tied to US subprime mortgages that soured dramatically, sparking what was hopefully a once-in-a-generation global financial crisis. But today’s Butterfield appears more focused in its purpose, more conservative in its management and all the wiser for the painful lessons of the past. It is by far the biggest constituent of the BSX — with its $1.68 billion market capitalisation more than nine times bigger than second-largest BF&M — and the only domestic-board stock on the BSX trading above book value. What is evident from the share price, at more than 2.3 times book value, is that the slew of institutions that have ploughed millions into the bank since its shares launched on the NYSE are bullish about its prospects for the future.
2017. February 22. Butterfield Bank’s biggest shareholder, The Carlyle Group, is a step closer to exiting its position with the bank. A public secondary offering of common shares in the bank, including an additional offering to the underwriters, includes all 7.6 million of the stock owned by Carlyle. It had always been expected Carlyle would move on after between five and seven years as a major shareholder. It was one of the key investors that put $550 million into the bank as part of a recapitalization programme in 2010. That move helped the Bermudian bank overcome difficulties it faced after it lost millions of dollars as a result of the US sub prime meltdown. Last September, Butterfield joined the New York Stock Exchange after a successful initial public offering. The listing has given the bank’s stock greater liquidity. US-based Carlyle Group is one of the world’s largest investment firms, with about $170 billion of assets under management. It has a 14.3 per cent stake in Butterfield. After the close of the markets on Wednesday, Butterfield announced the launch of the secondary offering. The bank will not receive any of the proceeds of the sale as the offering is from a group of major shareholders. In a statement, the bank said a group of its shareholders, including affiliates of The Carlyle Group, intend to offer 9.55 million common shares in an underwritten public offering. In addition, the underwriter will be offered a 30-day option to purchase up to an additional 1.4 million shares at the public offering price, less underwriting discounts and commissions. The shares offered will include all 7.6 million common shares owned by Carlyle. Butterfield will not be issuing any shares in connection with the offering. Goldman Sachs & Co, Citigroup, Sandler O’Neill & Partners, and Keefe, Bruyette & Woods are acting as the joint book-running managers. Raymond James and Wells Fargo Securities are acting as co-managers for the offering. The pricing and completion of the offering remain subject to a range of conditions. The bank’s share price has gained nearly 40 per cent since last year’s IPO. On Wednesday, the shares fell eight cents in New York to close on $32.93.
2017. February 13. Bank of Butterfield has reported profits of $115.9 million for last year — up $38.2 million on the $77.7 million recorded the year before. Net income per share was $1.18, down 5 cents on the previous year. After removing the effects of non-core items, core earnings for the year were $138.6 million, an increase of $24.7 million on the year before. The bank declared a dividend of 32 cents per common share for the last quarter of 2016, a threefold increase on the previous quarter and the same quarter last year. Michael Collins, Butterfield CEO, said that the bank had successfully completed its initial public offering on the New York Stock Exchange, which had improved liquidity for shareholders and given the bank access to international capital. He added: “Our community banking and wealth management businesses performed well in 2016, leading to a 22 per cent increase in core net income.” Mr Collins said the bank had bought HSBC’s wealth management business on the island, which had increased core net income by 22 per cent and wound down Butterfield’s UK private bank. He added: “Having repositioned the bank in jurisdictions in which we have scale, we are now focused on growing our community banking market share while cautiously expanding our wealth management business through trust acquisitions.” Mr Collins said the bank last year recorded core return on average common tangible equity of 20 per cent — without the level of credit exposure faced by a typical US regional bank. He added the bank had an $11 billion balance sheet, with $3.6 billion in loans and $7.2 billion in cash and securities, invested mostly in US government and federal agencies. Mr Collins said: “With high barriers to entry in each of our jurisdictions we are uniquely positioned to service the global private wealth emanating from Asia, Europe and Latin America.” After the IPO, the bank used $212 million of capital to buy back all the outstanding preferred shares, eliminating $16 million of dividends and government guarantee funds. Mr Collins said: “The bank’s shares have performed well, increasing in value by approximately 40 per cent since the IPO. The bank has declared a common dividend of 32 cents per share for quarter four 2016, which is more than three times the 10 cents quarterly dividend paid to common shareholders for the fourth quarter of 2015.” Non-interest income at the bank rose by $7.3 million, attributed to increases in revenues from banking fees, trust services and asset management, plus the acquisition of HSBC’s private banking investment management and trust businesses. Michael Schrum, Butterfield chief financial officer, said: “The HSBC acquisition was largely responsible for the year-on-year increase in deposits of nearly $1 billion, which, against a backdrop of limited loan demand in our core markets, drove the bank to direct more funds to its investment portfolio, which grew from $3.2 billion at year-end 2015 to $4.4 billion at year-end 2016. “Funds were invested primarily in US government agency securities and 93.7 per cent of the bank’s investment portfolio is held in A or better rated securities. The asset quality of the bank’s loan portfolio is similarly strong, with non-performing loans as a percentage of our total loans amounting to 1.6 per cent.” Operating expenses rose by $0.7 million to $285.9 million in 2016, although there were increased salary and other costs related to the HSBC acquisition, “significant” redundancy costs related to the London bank closure and $8.5 million in costs associated with the vesting of performance-based options triggered by September’s IPO. The bank also reduced professional and outside services costs, which went down by nearly $8.8 million last year. Net income for the last quarter of 2016 was $35.4 million, up $37.7 million from a loss of $2.3 million in the same quarter the previous year.
2016. December 22. Butterfield Bank gained some massive new shareholders — including some of the biggest names on Wall Street — as a result of its initial public offering on the New York Stock Exchange in September. Regulatory filings show an impressive breadth of institutional support for the offering, with 12 asset managers having holdings of more than $10 million in Butterfield, as of the end of September — and the value of those shares has risen more than 31 per cent since then. Butterfield’s IPO proved to be well timed. Expectations of higher interest rates, raised further by Donald Trump’s victory in the US presidential election, have resulted in the market turning bullish on the banking sector as a whole. A basket of mainly bank stocks, known as the Financial Select Sector SPDR ETF, which trades as XLF, rose 21 per cent from the close of trading on September 15, the day before Butterfield’s NYSE debut, through yesterday. Butterfield’s shares have outperformed even this remarkable rally. Yesterday, the bank’s New York-listed shares closed on $32.76, more than 38 per cent above the IPO price of $23.50. Most of that increase has come since the end of September, when Butterfield’s share price closed at $24.76. Holders of the bank’s Bermuda Stock Exchange-listed shares, which closed on $31 yesterday, have enjoyed the ride too. US regulatory filings show that Carlyle Group, which originally invested about $150 million in Butterfield as part of a recapitalization of the bank in 2010, remains the largest shareholder with 7.63 million shares, valued at $189 million as of the end of September. The private-equity firm planned to offload 17.5 per cent of its shareholding during the IPO. However, the second-largest shareholder was a newcomer — Wellington Management Group LLP, whose holding of 5.27 million shares was worth $130.5 million. Though this comprises a major shareholding in the bank it’s a small investment for Wellington, an 88-year-old Philadelphia-based global asset manager with nearly $1 trillion under management. Another new shareholder is Rovida Advisors Inc, now the bank’s third-largest owner with two million shares that were worth $49.6 million. The investment is Rovida’s second largest holding and represents just shy of a quarter of the firm’s total $201 million portfolio. The Wellcome Trust — another firm to invest in the 2010 recapitalization — continued to hold the fourth largest stake of 1.8 million shares worth nearly $46 million. But then come a string of new investors, the biggest being Alyeska Investment Group, led by Anand Parekh, which bought a $39.6 million position in the stock, comprising 0.4 per cent of its portfolio. FMR LLC, the US investment arm of fund management giant Fidelity Investments, loaded up with 1.29 million Butterfield shares that were worth $32 million at the end of September. Asset managers Southpoint Capital Advisors ($16.3 million), Millennium Management ($15.3 million), Hotchkis & Wiley Capital management ($14.5 million), NWQ Investment Management ($13.5 million), Philadelphia Financial Management ($12.2 million) and Citadel Advisors ($11.6 million) all had stakes with eight-figure valuations at the end of the third quarter. Some better known names also partook in the offering, including Goldman Sachs ($6.1 million), Bank of New York Mellon ($1.1 million), Morgan Stanley ($1.1 million) and Bank of America ($348,000).
2015. The Canadian Imperial Bank of Commerce, one of the major investors of 2010, exited its 19 per cent stake. Butterfield paid $120 million to buy back 80 million shares for cancellation. The Canadian bank's remaining 23 million shares were taken by the Carlyle Group and subsequently sold to exiting shareholders. Carlyle's involvement in the bank was originally expected to last between five and seven years, however its investment is now held in a fund featuring a ten-year investment. Butterfield currently has six primary shareholders. Entities affiliated with the Carlyle Group hold 22.7 per cent of the bank's common shares, with the majority of these owned by Caryle Global Financial Services Partners. The other primary shareholders, each holding between 5 and 8 per cent of the common shares, are Ithan Creek Master Investors (Cayman), Rosebowl Western, Nicholas Roditi, the Government of Bermuda Contributory Pension Plans, and Wyndham Holdings. Smaller shareholders include Bermudians and nominee companies. Once, until 2010, the bank was majority Bermudian-owned. 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.
HSBC, Bermuda, Royal Gazette photo
Harbourview Centre, Front and Reid Streets, Hamilton. Phone 295-4000. Fax 295-7093. Since 1889. Formerly the Bank of Bermuda Limited. The largest by a considerable margin and most profitable Bermuda bank, especially since February 2004 under HSBC ownership when acquired for US$1.3 billion. At HSBC acquisition the bank employed 1,050 people but reduced this to about 730 in 2012. About 47% of the local banking market. Charges a monthly checking account fee.
2018. August 21. New-style micro-chipped debit cards to provide better security and contactless payment are being sent out to customers of HSBC Bermuda. The bank issued credit cards with chip and pin technology two years ago, following the introduction of the technology by Butterfield Bank and Clarien. It has now extended the technology to its Visa debit cards. The cards feature an embedded and encrypted microchip for data storage that is said to be “virtually impossible” to reproduce. The chip allows for payments to be made simply by holding the card near a terminal, known as an RFID reader, which picks up a signal from the card. This does away with the need for the card to be swiped through a card reader. The card holder enters their personal identification number — pin — to complete the transaction. HSBC is advising customers that the new cards will have a different expiry date to the old-style debit card they replace, therefore customers should notify vendors, such as Belco, of the new expiry date if they have an standing orders or recurring payments set up on them. The bank said all its existing Visa debit cards will be replaced by the end of October.
2018. March 5. HSBC Bermuda’s value to the global banking group was underlined by a 38 per cent improvement in profits during 2017. The full-year results also give an insight into Bermuda’s economic activity and confidence levels. The bank’s non-performing loans dropped from 17.8 per cent to 14.7 per cent of its book, residential mortgages were steady, and personal loans for items such as boats, cars and bikes were up 24 per cent. “Small business loans were up about 40 per cent; that’s an encouraging sign,” said Mark Watkinson, chief executive officer and director of the bank. “We are seeing an uptick in international business and we are growing our retail business.” He has been at the helm of the bank for two years, and he described the 2017 results as strong, with all lines of business up from prior years. Mr Watkinson said there has been a “nice recovery of the business” with more resilience in the local market. HSBC Bermuda kept its staffing levels stable, even as it reduced operating costs by about 5 per cent. The bank reported full-year net income of $162 million, an increase of $45 million. Once the impact of notable and one-off items were deducted, the adjusted net income was $140 million, up 22 per cent for the year. Loan impairment charges fell from $19 million to $1 million, and this was attributed to an improved economic environment and a number of recoveries. Phil Alvey, chief financial officer, said the bank’s revenue had increased by 3 per cent. When asked for thoughts on the Bermuda Government’s Budget, announced last month, Mr Alvey welcomed the focus put on the tax base of the economy, while Mr Watkinson described it as “balanced” and said things of particular interest included the proposed raising of building height restrictions in the Hamilton Economic Empowerment Zone, and changing the 60:40 rule that restricts the level of overseas ownership allowed in many businesses. Mr Watkinson said: “If we are to make the economy grow, we have to look where to start. Sixty-forty is a somewhat contentious issue; when Bermuda was performing well, I could understand the desire for some ring-fencing of businesses.” But he noted that times change, and for some older business owners now looking to sell their business because they had no family succession plan, a relaxing of the 60:40 rule could be helpful. David Burt, the Premier, also announced in the Budget that there would be consultation on expanding the types of banks that can operate in Bermuda. Details are scant, however Mr Watkinson believes it would be positive if it meant attracting quality banking sector brands to the island. “From my perspective, I would welcome it. If we could persuade JP Morgan, Wells Fargo, and Citigroup to open shop here that would be a good thing; they are strong brands that would add credibility to our market,” he said. HSBC Bermuda’s adjusted total operating income in 2017, before loan impairment charges, was $280 million, a rise of $8 million due to higher net interest income. Its consolidated operating expenses were $139 million, consistent with 2016. The bank has issued credit card customers with cards that include an integrated circuit on a chip, which is a card authentication security feature widely used in many parts of the world. The bank is moving to introduce the same technology to its debit cards. Another technology introduced is Touch ID, which uses fingerprint or facial recognition to give customers access to mobile banking on iPhone 5S and newer models. Beyond its core operations, the bank and its staff engage with the local community, most significantly supporting The Eliza DoLittle Society, which helps those in Bermuda who are “food-insecure and hungry”. The partnership between HSBC Bermuda and Eliza DoLittle has been in place for two years, and in the last three months of 2017, HSBC staff served 1,300 hot meals and distributed groceries to 9,000 families and individuals. Mr Watkinson said the programme is open to all bank staff, and is conducted on the bank’s time. He added: “We have a 93 per cent participation rate. People can do cooking, serving or food distribution. Last year we served 10,500 meals. We want the staff to feel they are playing a part. It is also a good opportunity for team building and a time for people to relax.” Looking to the future of the bank in Bermuda, Mr Watkinson said: “If you look at our record, we remain an important part of the [HSBC] group. Our adjusted return on equity is 17 per cent, which is above the 10 per cent target for the group.” He said the bank was performing well and returning value to shareholders. He added: “For us, Bermuda is a good market.”.
2018. March 3. HSBC Bermuda made a profit of $162 million last year, an increase of $45 million, or 38 per cent, year-on-year. Once the impact of notable and one-off items were deducted, the adjusted net income was $140 million, up 22 per cent for the year. Adjusted total operating income, before loan impairment charges, was $280 million, a rise of $8 million due to higher net interest income. Loan impairment charges fell from $19 million to $1 million, and this was attributed to an improved economic environment and a number of recoveries. Non-performing loans decreased from 17.8 per cent to 14.7 per cent of the bank’s total portfolio. Consolidated operating expenses were $139 million, consistent with 2016. Mark Watkinson, chief executive officer and director, said: “All our core businesses delivered revenue and profitability ahead of the prior year and the bank’s capital and liquidity potions remain robust.” He added the strong US economy was likely to have a positive spillover effect for Bermuda’s economy. Mr Watkinson said: “The recent tax changes in the US have caused some initial uncertainty in the international business sector and this is going to need close monitoring.” Mr Watkinson added the fight against financial crime remained a top priority for the financial sector in Bermuda. He said: “While banks across the local market have sought to mitigate the customer impact, the importance of a strong review by the Caribbean Financial Action Task Force later this year to cement Bermuda’s reputation as a top-quality financial centre cannot be over-emphasized.” HSBC Bermuda’s total assets at the end of 2017 were $9,027 million, a drop of 7 per cent year-on-year, while total loans and advances to customers were in line with the previous year at $2,281 million. One-off and notable items last year, which the bank said were not reflective of its underlying performance, included a $22 million gain on sale of an equity shareholding to another member of the HSBC Group, a $55 million increase in legal provisions recorded in operating expenses for last year and $23 million from four months of contribution and the gain on sale of its private banking operations, included in the profit for 2016.
2017. September 6. Bank of Bermuda Foundation has launched a new website that will soon enable online funding applications, while also unveiling what it describes as “bold new goals for grant-making”. The changes, which have been two years in the making, are described as being part of a “more deliberate approach” to supporting the Bermuda community. The foundation’s long-term vision for Bermuda is that “all people are healthy, independent, financially secure and connected to community, with equitable opportunities for all”. The foundation’s new grant-making strategy focuses on four new areas of funding: economic participation, education, healthy families and connected communities. The new website offers extensive information on the foundation’s funding guidelines and details the new areas in which it intends to focus its grant-making. The website also provides clear information about the process of applying for grants. Designed and developed locally by Sebastian Matcham of Subtropik, the new website provides information on the foundation’s background, the people involved and the process of developing the foundation’s new direction. Soon the site will also feature an online grant application system, enabling local organisations to make paper-free applications. Tom Conyers, the foundation’s chairman, added: “Our areas of funding, consistent with our vision, represent a focus on economic equity; education for independent thinking and productive engagement; health and well-being for all age groups and an inclusive and welcoming community. The new website provides an in-depth guide to our new grant-making goals and assists potential grantees through the application process online.” The non-profit sector has been included in several ongoing presentations this year, introducing the new grant-making system and has responded eagerly to the Foundation’s new goals. With a December 1 deadline for the first round of applications for 2018 grants, non-profit organisations are urged to visit the new website to learn more about the new focus areas for grant-making and the new application form. Application form orientation is scheduled for early October and all non-profits are invited to attend. Under the new restructure, the foundation is supported by key people in spearheading the foundation’s new goals for grant-making. David Lang, managing director, oversees the overall relationships with the community and community organisations as well as the general business affairs of the foundation. Vivien Carter, programme officer, is responsible for developing resources and relationships to assist in implementing the foundation’s new direction. And Kim Pratt, senior trust officer, Butterfield Trust (Bermuda) Ltd, handles all inquiries and organizational administration. The Bank of Bermuda Foundation website can be found at www.bankofbermudafoundation.bm
2017. February 24. HSBC Bank Bermuda Ltd booked net profits of $117 million last year — up more than a third on 2015. A fall in loan impairment provisions and lower operating expenses after the sale of private banking operations last year contributed to the increase. Mark Watkinson, HSBC Bermuda’s chief executive officer, pointed to “continuing modest improvement” in the economy and said the bank had seen a significant rise in demand for residential home loans. In its earnings statement, the bank said it took a $21 million charge to lower the carrying value of buildings, since last year’s decision to “explore alternative options” for its offices near Albuoys Point. But this was largely offset by a $20 million gain recorded on the sale of the private bank unit. And the bank paid a $280 million dividend to its owner, HSBC Holdings Ltd, the global banking group. Return on equity was 12 per cent, exceeding the 10 per cent target of the parent group. Excluding the buildings charge, operating expenses were $145 million, down $31 million, or 18 per cent on last year. The decrease was mainly due to the sale of the private banking operations to Butterfield, completed last April, which reduced the number of employees in Bermuda and cut support costs. Total loan impairment charges decreased to $19 million from $36 million in 2015. But non-performing loans, making up 14 per cent of the total loan portfolio, down from 17 per cent in 2015. Phil Alvey, HSBC Bermuda’s chief financial officer, said NPLs included all loans that had been renegotiated — even though the majority of such borrowers were now making repayments on time. Total loans and advances to customers were $2.29 billion at the end of 2016, a decrease of 7 per cent compared to a year earlier. The decrease is the product of the debt being paid off by borrowers outsizing new loans being taken out. Mr Watkinson said new mortgages tended to be smaller than older ones, given the 30 per cent fall in real estate values from pre-recession highs and the 20 per cent minimum down-payment requirement these days. “We saw double-digit growth in lending in the residential housing market last year,” Mr Watkinson said in an interview. “There is generally more confidence in the economy. But there is a split in the level of confidence between local and international. In the local community, people are feeling much better about life. That filters through into car sales, so the auto sector is feeling very good. On the international business side, it’s more difficult. There were a couple of significant surprises last year and it’s a very uncertain world and so the international business sector is feeling a bit uncertain. So in Bermuda we have to be very careful, because international business is a critical part of the economy and we need it to feel positive about Bermuda and the opportunities here.” The recent approval of legislation to enable the building of a new airport terminal was something that would strengthen international business confidence, Mr Watkinson said. “Infrastructure is often overlooked,” he added. On the impact of the change in political power in the US and potential corporate tax cuts eroding Bermuda’s tax advantage, Mr Watkinson said: “No one knows what’s going to happen with the US tax situation. But when I talk with customers about why they choose Bermuda, tax is a factor but it’s not that high on the list. In terms of insurance, it’s a real market. You can walk down the street and put together a half-billion-dollar insurance policy. The regulators do a great job and Solvency II equivalence was an outstanding success and great work by the Bermuda Monetary Authority.” In the earnings statement, Mr Watkinson said it continued to be a challenging environment for banks. “Our core businesses all delivered strong results and show robust prospects for the future,” he said. “The local economy is displaying greater resilience than in recent years and it appears we have worked through many of the problem loans in our portfolio.” The sale of the private banking operations was the main factor in the 19 per cent fall in total assets to $9.76 billion. Total capital adequacy ratio — a measure of financial stability — improved to 24 per cent at the end of 2016 from 22 per cent a year earlier. HSBC said that the sale of its private banking operations allowed it to focus on core strengths in Bermuda. These are retail banking wealth management, including HSBC Asset Management and Premier banking, commercial banking and global banking and markets. The net profit from these continuing operations was $93 million for the year with a cost efficiency ratio of 59 per cent, the bank said. Excluding impairment of buildings, net profit from continuing operations was $114 million with a cost efficiency ratio of 51 per cent. “The core businesses all delivered results ahead of expectations in 2016,” the bank stated. HSBC added: “The balance sheet remains conservative with strong capital and liquidity positions, even after making significant returns to our shareholders in 2016. The bank is well positioned to absorb the impact of future regulatory requirements under Basel III.” Mr Watkinson said staff had also doubled volunteer hours on the bank’s time from 2015. “Such efforts have now accumulated over 10,000 hours of community service since we launched the Staff Volunteer Community Action Day Programme in 2006,” Mr Watkinson said. “We were also able to contribute $700,000 directly to various education, environment and community initiatives, partly supported by funds made available by the HSBC Group to mark its 150th anniversary.” The volunteer effort included a programme in conjunction with the Salvation Army and the Eliza DoLittle Society to provide free cooked meals to the needy once a week at Cathedral Hall. Staff from the bank have been divided into 43 teams, Mr Watkinson said, and two teams per week — one cooking and one serving — make meals for around 100 homeless and poor people. “It energizes our staff and they appreciate that they can go out and do something so worthwhile during bank hours,” Mr Watkinson said. “For the bank, it’s great for team-building and there’s a great return on investment — and it’s a great community investment as well.”
Bermuda Commercial Bank Ltd (BCB)
P. Gutteridge Building, Hamilton, PO Box HM1748, Hamilton HM GX, Telephone:
.One of Bermuda’s four licensed banks. Charges a monthly checking account fee and more. On June 2, 2015 it announced it was moving its custody services relationship to Royal Bank of Canada’s (RBC) investor & treasury services, an award winner in the global custody services sector. BCB said its custody provides a single dedicated contact person to ensure that the client does not feel ‘lost in the stream’ as is the case in many large institutions.
Owned by Somers Ltd. A listed Bermuda-incorporated international financial services investment holding company whose major assets include its 100 percent owned subsidiary, Bermuda Commercial Bank Limited, one of Bermuda’s four licensed banks and a 62.5 percent holding in Waverton Investment Management Limited, a UK wealth manager with over US$8.7 billion assets under management. The Group’s other investments include an approximate 68 percent economic interest in the London Stock Exchange listed Private & Commercial Finance Group PLC, a UK asset financing company, an 84.6 percent stake in Westhouse Holdings PLC, a corporate and institutional stock broking group, a 30 percent economic interest in Ascot Lloyd Holdings Limited, a UK independent financial adviser and a 21 percent economic interest in Merrion Capital Holdings Limited, an Irish financial services group.
2019. February 7. The owners of a company that was poised to make tens of millions of dollars from a controversial casinos deal with the Government are now involved in buying a Bermuda bank. Bermudian businessmen John Tartaglia and Michael Moniz, owners of MM&I Holdings, were named last week on a notice to incorporate Permanent Capital Holdings Ltd, a local affiliate company of a private American investment firm, which announced yesterday that it was purchasing Bermuda Commercial Bank. The pair were listed in the legal notice alongside lawyers Mark Pettingill and Grant Spurling, of Chancery Legal law firm, and Logan Sugarman and Lewis Katz, managing partners of New York-based Permanent Capital. Mr Pettingill, a former politician who is Permanent Capital’s lead counsel in Bermuda, told The Royal Gazette the intention was to “maintain the status quo” and “grow” the bank with its existing team. He said providing banking services to the gaming industry was “absolutely not a focus” and did not form part of BCB’s business plan. Mr Pettingill added: “There is no gaming industry on island to bank.” A spokesman for Permanent Capital said Mr Tartaglia and Mr Moniz were directors of a local holding company that was being used to enable the merger agreement to go ahead, and neither they, Mr Pettingill nor Mr Spurling would be the ultimate owners of BCB once the transaction was completed. Mr Sugarman added in a statement today: “It is unfortunate that in using a local law firm and its recommended interim legal structure, Permanent Capital was linked to another local business with which it otherwise has no association. The sole owners of Permanent Capital Ltd and the sole owners of BCB post-close, are and will be Lewis Katz, Logan Sugarman and Chris Maybury.” Mr Tartaglia and Mr Moniz were behind an attempt to land a lucrative government contract to provide a cashless gaming system to any casinos that opened in Bermuda, as outlined in a special report in The Royal Gazette in October 2017. MM&I entered a non-binding memorandum of understanding with the Government a year before casino gaming on the island was approved in Parliament — while Mr Pettingill sat in Cabinet as Attorney-General, along with the late Shawn Crockwell, who was the tourism development minister and responsible for gaming. The ten-year deal, with the option for another ten years, would have allowed MM&I to reap 40 per cent of gross gaming revenue from all electronic gaming devices on the island, as well as an 8 per cent transaction fee on money exchanged for chips on dealer-operated tables. The rewards were expected to be substantial, based on projections in a 2010 green paper on gaming. The government-commissioned report estimated that casino gambling could generate potential revenues of between $84 million and $146 million a year, with electronic gaming accounting for about three quarters of that. The potential cashless gaming deal was flagged up as a cause for concern by the Bermuda Casino Gaming Commission, which warned that individuals associated with MM&I’s partner firm, Florida-based Banyan Gaming, had previously surrendered their gaming licences in two major US gambling jurisdictions. The MOU was terminated by the Government in July 2016. Banyan representatives appeared as “expert” panellists at a Progressive Labour Party forum ten months later and told the audience that a cashless system for casinos should be mandated by law. Present at the forum were Mr Pettingill and Mr Crockwell, who set up a private law firm after leaving Cabinet, which went on to represent MM&I. In response to The Royal Gazette’s special report, MM&I said in a statement issued by Mr Pettingill that it would give the majority of any profits it made from a casinos deal to “churches, community clubs, vulnerable citizens’ programmes, etc”. Mr Tartaglia said in July last year that MM&I no longer had “any interest in participating in the gaming industry in Bermuda”. Banyan’s chief executive, Ken Jarvis, said the company had “no intention of becoming involved in the Bermuda gaming industry”. No casinos have opened in Bermuda since the law to allow them was passed in December 2014. Regulators said one of the key stumbling blocks has been the unwillingness of local banks to be involved in the industry. The Royal Gazette asked the island’s three largest local banks a year ago if they had decided whether to conduct financial transactions for any casinos that open here. HSBC said it had taken a global decision to limit its involvement with the gambling sector. Clarien said it would make a “risk-based decision” on whether to have further discussions with its stakeholders, including its overseas correspondent banks, once it had a better understanding of the island’s casino legislation and regulations. Butterfield Bank declined to comment.
2018. May 9. Somers Ltd’s first-quarter profits rose on the back of an increase in the value of the companies in which it invests. The financial-services holding company and owner of Bermuda Commercial Bank, said net income for the first three months of the year was $18.5 million, up from $4.1 million in the first quarter of 2017. The Bermuda Stock Exchange-listed company’s net asset value per share was $19.91 at the end of March, compared to $18.55 six months earlier. Somers reported a $16.4 million gain on its investment portfolio during the three months — principally due to an increased valuation of the company’s holding in Australian lender Homeloans Ltd due to a stronger financial performance. The bulk of Somers’ investments are in three companies — Homeloans at $138.2 million, BCB at $101.8 million and UK wealth manager firm Waverton Investment Management Ltd at $91.2 million, which together represent 83.9 per cent of total investments. BCB made a profit of $0.8 million during the six months and a capital ratio of 23.3 per cent. Homeloans reported normalized profit after tax of A$12.9 million ($9.94 million) for the six months ended December 31, 2017 and assets under management of A$11.1 billion. Waverton has assets under management of £5.3 billion ($6.7 billion), while PCF, a UK specialists bank in which Somers has a 65.7 per cent stake, has retail deposits of £100 million ($135.7 million). The Somers board declared an interim dividend of 21 cents per share for the six months of the company’s financial year. Warren McLeland, chairman of Somers, said: “The investee companies continue to perform strongly with excellent financial results. In particular, assets under management growth at Homeloans and strong deposit and loan growth at PCF has been pleasing. While markets are currently more volatile, our investments continue to produce strong operating earnings. The company’s valuations have also been positively impacted by an increase in the value of sterling in the quarter which more than compensated for the slight fall in the value of the Australian dollar.” Somers’ net foreign exchange gains were $2.7 million for the quarter. During the three months, the UK pound appreciated 3.9 per cent versus the US dollar while the Australian dollar depreciated by 1.6 per cent. Mr McLeland added: “Post the quarter end we agreed to sell our investment in Merrion Capital and it is anticipated that this transaction will complete later in 2018.” Somers’ share price ended the period at $14.25 — where it remained on the BSX yesterday — a discount of 28.4 per cent to the company’s net asset value per share.
2018. February 23. Somers Ltd generated net income of $15.5 million in the last three months of last year, helped by a strengthening of the UK pound. The Bermudian-based financial-services holding company, which owns Bermuda Commercial Bank, reported strong results across all its major investments. In what was the first quarter of Somers’ fiscal year, earnings were 80 cents per share, compared to a 63-cent loss in the same period in 2016. Warren McLeland, chairman of Somers, said: “The first quarter of the year has been positive for our major investments with the majority recording strong financial performances. Our portfolio valuations were supported by favorable currency movements with positive sterling currency gains offsetting a weaker Australian dollar. In particular, we recorded a 10.2 per cent increase in our Homeloans valuation following continued solid mortgage settlement flow during the quarter. Recent volatility in the capital markets and the resultant fall in global stock indices and increases in bond yields post quarter-end ensures that we will remain cautious on the outlook for the remainder of the financial year.” The company’s net asset value per share ended the quarter at $19.29, up from $18.55 at the end of September. During the quarter there was a $14.5 million valuation gain on Somers’ investment portfolio. The gain was principally due to increases in the value of Australian lender Homeloans, in which Somers holds a 62 per cent stake, and Stockdale Securities, a stockbroking firm, thanks to strong financial performance at those companies. However, Somers added there was also a slight fall in the valuations of both BCB and PCF, a UK specialist bank in which Somers has a near two-thirds stake. Somers also has a 62.5 per cent holding in Waverton Investment Management, a UK wealth manager with £5.5 billion ($7.7 billion) of assets under management. Somers received dividend income of $1.3 million from Waverton during the quarter. Within its $374 million investment portfolio, three holdings represent 83 per cent of the total. Homeloans is valued at $125.3 million, BCB at $100.8 million and Waverton at $86.1 million. Net foreign exchange gains for the quarter were $500,000. Shareholders’ equity was $375.5 million at the end of last year, up from $361.2 million at the end of September. Somers’ share price ended the year at $14.25 — where it remained yesterday on the Bermuda Stock Exchange — a discount of 26.1 per cent to the company’s net asset value per share.
2017. December 18. Somers Ltd, owner of Bermuda Commercial Bank, said net income fell nearly 40 per cent to $19.4 million for the year ended September 30. The financial-services holding company with interests in the UK, Australia and Ireland said BCB had made a $1.1 million profit, while the group had slashed its total borrowings to $4.5 million from $26.5 million a year earlier. Warren McLeland, chairman of Bermuda Stock Exchange-listed Somers, said it had been a “strong year” for the group, with increases in the value of its 62 per cent stake in Australian lender Homeloans and its 62.5 per cent stake in UK wealth manager Waverton Investment Management. “With supportive capital markets, our investments have been able to grow their assets under management and this has had a positive impact on their financial results,” Mr Mcleland said. “Unlike in 2016, currency movements have been mildly positive for our valuations with both sterling and the Australian dollar strengthening against the US dollar.” Somers reported an 11-cent decrease in net asset value per share to $18.55, mainly due to the issue of shares from the pro rata bonus warrant issue at a discount to net asset value earlier in the year. Mr McLeland added that another UK investment, PCF Group, had received a British deposit-taking licence in July. “Since then, PCF has built up its deposit base to £53 million ($71 million) and this will assist their future growth,” Mr McLeland added. The Somers board declared a final dividend 28 cents per share, to bring the total dividend for the year to 48 cents per share, up 4 cents on 2016. This represents a 3.4 per cent yield on Somers’ $14 share price at the end of the period. Today, Somers was trading at $14.50 on the BSX. Homeloans is now Somers’ largest investment with a value of $107.5 million and reported assets under management of A$10.2 billion ($7.8 billion). The values of investments in Homeloans, Waverton and PCF all rose, driving a $15.2 million gain in Somers’ investment portfolio. But the valuation of BCB decreased “due to the delay in BCB implementing its new strategic plan”, Somers said. Somers added BCB had a capital ratio of 22.5 per cent at September 30, with 49 per cent of assets in cash and high quality liquid assets. Waverton posted pre-tax income of £9.4 million, up from £7.9 million in 2016, and assets under management of £5.2 billion. During the year, Somers sold its stake in Ascot Lloyd for £15.3 million and used the proceeds to pay off bank debt.
2017. August 15. Somers Ltd reported a $6 million profit for the quarter ended June 30. The financial-services investment holding company, which owns Bermuda Commercial Bank and holdings in the UK and Australia, said it had benefited from currency fluctuations during the three-month period. After the end of the quarter, Somers announced the sale of its stake in UK-based financial advisory form Ascot Lloyd Holdings — a sale which has allowed Somers to pay off all of its debt. Warren McLeland, chairman of Somers, said: “The investee companies continue to perform strongly with excellent financial results in particular at Homeloans and Waverton. At the end of the quarter, the Company completed the profitable sale of its investment in Ascot Lloyd. “The company’s results have benefited from strong capital markets in 2017 and during the quarter ended June 30, 2017 both the Australian dollar and sterling increased in value against the US dollar. This positively impacts the company’s overall valuation given 60 per cent of the investment portfolio is denominated in either Australian dollars or British pounds. We were pleased to recently announce the company’s bonus warrant issue, the proceeds of which combined with the proceeds from the sale of our Ascot Lloyd investment has enabled the company to completely eliminate all of its debt post the quarter end. The company’s balance sheet is strong and we therefore look forward to the rest of the year with cautious optimism.” The results did not specify net income for BCB, but Somers said the bank maintains “a high capital ratio of 23.2 per cent and a highly liquid balance sheet with 43 per cent in cash and high quality liquid assets”. Assets under management at Homeloans Ltd, Somers’ Australian holding, increased to $9.4 billion and as part of its funding programme completed a successful A$1 billion residential mortgage-backed securities issue. Its major UK investment, Waverton Investment Management Ltd had assets under management of £5.2 billion at June 30. During the first six months of its fiscal year, through the end of March, the company announced a loss of $6.6 million. Somers’ $6 million net income compared to $0.1 million in the corresponding quarter of last year. This reduced the year to date net loss to $0.6 million. Somers’ diluted net asset value per share was $17.63 as at June 30, 2017. As of the close of trading on the Bermuda Stock Exchange on Tuesday this week, Somers’ share price was $13. Somers recorded a $2.7 million gain on its investment portfolio during the June quarter and this reduced year to date investment losses to $1.4 million.
2017. July 4. Somers Ltd has announced the surprise sale of its entire investment in Britain’s Ascot Lloyd Holdings. The price of the transaction has not been disclosed, however Somers held a 51 per cent controlling stake in independent financial advisers Ascot Lloyd. The news comes only a week after Somers, the parent company of Bermuda Commercial Bank, released its earning report for the six months to the end of March, which showed a $6.6 million net loss. Ascot Lloyd yesterday said it had merged with Bellpenny, a fast-growing financial planning and consolidation company based in England. Somers sold its stake in Ascot Lloyd, comprising £8.75 million ($11.3 million) of convertible loan notes and £4.45 million ($5.76 million) of loans, to CPL Bidco, a company ultimately controlled by global investment management firm Oaktree Capital Management. Oaktree supports Bellpenny. The merger in Britain created Ascot Lloyd Bellpenny, which is said to have £6 billion assets under advice. Somers’ investment in Ascot Lloyd stretches back to 2012 and was linked to a private placement with Utilico Investments Ltd, the company’s largest shareholder, which saw Somers acquire Utilico’s interest in Ascot Lloyd. It increased its investment in Ascot Lloyd, particularly in 2014 and 2015, and invested a further £2.3 million in the company this year. Somers is a Bermuda Stock Exchange-listed financial services holding company. It holds a major stake in Bermudian property and investment company West Hamilton Holdings. It also has stakes in a number of businesses around the world, including Homeloans Ltd in Australia, and Waverton Investment Management Ltd in the UK. Somers has been hit by the weakness of the British currency during the past few years, most notably following the UK’s vote last year to leave the European Union. The company has said more than half of its gross assets are denominated in currencies other than the US dollar — chiefly sterling and the Australian dollar. Meanwhile, a capital-raising programme was launched by Somers on Friday when it listed a rights issue of bonus warrants to existing shareholders. The company has invited its shareholders to buy two bonus warrant shares at $13.50 for every five common shares they already own. The company is issuing up to 4,837,066 of the bonus warrant shares, representing a potential capital boost of $65 million if all are exercised. The offer expires on September 30. Announcing the bonus warrant shares on June 23, Warren McLeland, chairman of Somers, said: “The bonus warrant issue offers qualifying shareholders an opportunity to those shareholders who would like to participate in the growth of the company. It enables Somers to significantly reduce its debt burden, thereby freeing up cash flow to invest in new opportunities or to support existing investments.” Somers has a market capitalisation of $187.9 million. Its shares were yesterday trading at $13 on the BSX.
2017. June 27. Financial services investment company Somers Ltd yesterday announced a net loss of $6.6 million for the six months to the end of March. However, the parent company of Bermuda Commercial Bank and part owner of several businesses in Britain and Australia, was still able to raise its dividend by more than 10 per cent, reflecting its board’s confidence in its investee firms’ performance. A major reason behind the net loss was investment losses of $4.1 million in the year to date, compared to around half that figure — $2.2 million — in the same six-month period the previous year. The six-month report said: “Investment gains and losses result from changes in the valuation of the company’s investments and the year-to-date loss was due to reductions in the value of our holding in Ascot Lloyd following a reduction in the company’s maintainable earnings before interest, taxes, depreciation and amortization.” Somers’ total assets stood at $337.3 million at the end of the first quarter, down from $346.9 million at the end of September 2016. Somers owns Bermuda Commercial Bank and has a 59 per cent stake in Australian firm Homeloans Ltd, and a 62.5 per cent holding in the UK’s Waverton Investment Management. Other investments include 51 per cent of Ascot Lloyd Holdings in the UK, a 57 per cent share of Bermudian property management and investment company West Hamilton Holdings, a 23 per cent investment in Ireland’s Merrion Capital Holdings and a 75 per stake in Britain’s Stockdale Securities Ltd. Warren McLeland, chairman of Somers, said: “The investee companies continue to perform strongly with excellent financial results, in particular at Homeloans and Waverton. During the quarter, the company invested a further $2.3 million in Ascot Lloyd to fund a portion of the deferred consideration owed by Ascot Lloyd on one of its recent acquisitions.” Mr McLeland added that both the UK pound and Australian dollar had increased against the US dollar in the first quarter of 2017, which had improved Somers’ overall valuation as 59 per cent of its holdings are in pounds or Australian dollars. He said: “The board of directors is pleased to recommend an interim dividend of 20 cents per share, a small increase on last year’s interim dividend. This reflects the performance of the underlying investee companies and the company’s future prospects. We were pleased to recently announce the company’s bonus warrant issue, the proceeds of which will enable the company to materially reduce its debt. We therefore look forward to the rest of the year with cautious optimism.”
2017. February 21. The weakness of the UK pound was the major factor driving the owner of Bermuda Commercial Bank to a $10.7 million loss in the fourth quarter of last year. Somers Ltd, a Bermuda Stock Exchange-listed financial services holding company, said more than half of its gross assets were denominated in currencies other than the dollar — chiefly the UK pound and the Australian dollar. During the quarter, sterling weakened by 5 per cent against the US dollar as the repercussions of the UK’s vote to leave the European Union continued to weigh on the currency. Somers’ net asset value per share fell to $17.58 from $17.81 during the three months ended December 31, a fall of 4.4 per cent, mostly unrealized losses. Net foreign exchange losses were $6.6 million for the quarter with an additional $3.6 million of exchange losses on Somers’ investment in its foreign operations. Somers has stakes of varying sizes in several UK-based firms, including Waverton Investment Management Ltd, Ascot Lloyd Holdings Ltd, Merrion capital Holdings Ltd and Stockdale Securities Ltd. During the quarter, Somers completed a deal that gave it a 59 per cent stake in Australian lender Homeloans Ltd. There was a $3.7 million loss on the company’s investment portfolio during the last three months of the year, resulting from a change in the valuations of holdings including Ascot Lloyd, Waverton and BCB. The investment portfolio was $317.2 million at the end of last year, down from $332.0 million as of September 30, with equity investments accounting for 95 per cent of this total. The company did not detail earnings for BCB, but said the bank maintained “a high capital ratio of 23 per cent”. Shareholders’ equity ended the quarter at $215.7 million, down from $230.4 million at the end of the third quarter. Somers bought back 3,149 of its own shares at a cost per share of $13.30 during the three months. Somers’ share price on the BSX ended the period at $13.75 — a discount of 22.8 per cent to the company’s diluted net asset value per share. “The last quarter has been characterized by continued US dollar strength and this has negatively impacted our net asset value by 4.6 per cent due to a significant percentage of our portfolio being denominated in non-US dollar currencies,” Warren McLeland, chairman of Somers, said. “However, the underlying performance of our invested companies continues to be strong. During the quarter, Resimac merged with the ASX-listed Homeloans Ltd and Somers is now a 59 per cent shareholder in Homeloans. We look forward to working with the Homeloans management team and assisting them in driving the synergies that made the merger compelling. In December, PCFG received conditional approval for a deposit-taking licence in the UK and they anticipate being in a position to accept deposits in the second half of 2017. This is a key moment in their development and has the potential to be a step change for the business. Our other investee companies continue to benefit from strong equity markets and even allowing for the increased geo-political risk are well positioned for 2017.” We therefore look forward to the rest of the financial year with cautious optimism.”
19 Reid Street, Hamilton HM 11. P. O. Box HM 1194, Hamilton HM EX. Phone (441) 296-6969. Fax (441) 296-7701. On January 7, 2014 it amalgamated with and on April 22, 2014 changed its name. Formerly Capital G Bank Ltd.
2019. January 3. NCB Financial Group, the company that owns a majority stake in Clarien Bank, has made a bid to take a controlling interest in Caribbean region insurer Guardian Holdings Ltd. Controlled by Michael Lee-Chin, the Jamaican-born billionaire, NCB has a 50.1 per cent stake in the Bermudian bank. Mr Lee-Chin’s Portland Private Equity owns an additional 17.9 per cent stake in Clarien. On Monday, NCB’s subsidiary NCB Global Holdings, made an offer to all Guardian shareholders to buy up to 32.01 per cent of the company. The $2.79 per share offer is worth more than $207 million in aggregate. NCB already owns 29.99 per cent of Guardian, which is based in Trinidad and Tobago and offers life, health, property and casualty insurance, as well as pensions and asset management in 21 countries across the English and Dutch Caribbean. If the bid is successful, NCB would own a 62 per cent controlling interest in Guardian. The offer is conditional upon Guardian shareholders tendering sufficient shares to give NCB a more than 50.01 per cent stake and on regulatory approvals for the deal. The offer period is scheduled to close on February 7, 2019.
2018. June 25. Clarien Bank Limited has donated $5,000 to The Flora Fund to help aspiring and talented local athletes reach their goals. The fund was established by Flora Duffy, the two-times ITU world champion triathlete and Commonwealth Games gold medallist. The donation was presented to Flora’s father Charlie Duffy during the awards ceremony at Saturday’s 30th annual Clarien Iron Kids triathlon — the event where Flora first began her competitive career more than 20 years ago. Ms Duffy, who was off island training for the World Triathlon Series Hamburg event on July 14, in a statement said: “The Iron Kids triathlon is where I did my very first triathlon. I think I was seven years old. It is wonderful that the race has continued to be held every year, and the fact that this year’s event had a record 300 kids entered, is simply amazing. I wish I could have been there to witness it in person.” She added: “I’d like to thank Clarien Bank for sharing my passion for triathlon, and the positive impact sport has on the youth of Bermuda. I’m humbled by the donation to The Flora Fund and pledge to direct the funds to deserving talent later this year.” Ms Duffy has also won the ITU Cross Triathlon world championships, and is a multiyear winner of the Xterra world championships. She was awarded the OBE this month for her services to sport in Bermuda. Michael DeCouto, Clarien’s chief digital and marketing office, presented the donation. He said: “Clarien is honored to make this donation to The Flora Fund. Flora has been an inspiration to everyone in Bermuda, not just for her spectacular world-class athletic achievements but for her humility and humanity off the race course. Those qualities are epitomized by The Flora Fund and her willingness to give back to the community. We can’t think of a better way to celebrate the 30th anniversary of Clarien Iron Kids and its continued success as one of the island’s leading youth sports events. Flora has shown what can be achieved with determination and hard work and we look forward to more of our Iron Kids following in her illustrious footsteps.”
2017. December 19. Billionaire investor Michael Lee-Chin sees a bright future for Bermuda — a view he has backed with hard cash in the form of his purchase of a controlling interest in Clarien Bank. The charismatic Jamaican-born chairman of Canadian firm Portland Holdings is not troubled by the growing pressure being applied on the island by major countries looking to clamp down on tax avoidance. In an interview, he said he saw opportunity amid the uncertainty, guided by his long-term confidence in both the island and its wealth-management industry. And he spoke of his penchant for wealth-building opportunities at times of crisis, of moving in when other investors are moving out. On December 1, Clarien Group announced agreement on a deal that would give companies controlled by Mr Lee-Chin’s Portland group of companies a 68 per cent stake in the Bermuda company. Portland Private Equity, which initially invested in Clarien in April 2016, will hold a 17.9 per cent interest in Clarien under the terms of the deal, while NCB Financial Group will own 50.1 per cent. Edmund Gibbons Ltd owns the remainder. Speaking from Canada, Mr Lee-Chin explained the thinking behind this substantial investment. “I’m very bullish on Bermuda, because Bermuda has a phenomenal global reputation, and because its current situation has given us an opportunity to enter the market. Also, wealthy people from around the world still want to protect their assets, so there will be an opportunity to service their needs.” He said the attention focused on offshore financial centres like Bermuda from tax-hungry major countries had created an improved investment opportunity. “We are firm believers in the Chinese definition of the word crisis,” Mr Lee-Chin said. “Crisis = danger + opportunity. We can’t get the opportunity unless there is a crisis. When there is a crisis, most people focus on the ‘danger’ component, but those with long-term thinking recognize the opportunity.” Global financial institutions were pulling out of offshore centres, he said, something he described as a “kneejerk reaction” to today’s circumstances. “In five or ten years from now, the global players will want to return,” he said. “With the benefit of time they will realize that there is still a strong demand from clients to protect their assets and Bermuda has developed a reputation as a safe place to do that. The rising demand for asset protection is a long-term, secular trend and I always want to invest in a business with a rising tide that will lift all boats and will lift ours.” The island’s advantages included its British legal system, the fact that it is English speaking, has a great mid-Atlantic location, and also that it has a strong reputation for stability, he added. An example of how Mr Lee-Chin’s opportunity-from-crisis investment philosophy has worked for him came with Portland’s purchase of National Commercial Bank Jamaica Ltd in 2002. At the time, NCB had 24 per cent market share in Jamaica, where Canadian banks, one of which had a 54 per cent market share, were dominating. He recalled: “At the time we bought the bank, staff morale was low because they couldn’t compete against the Canadian banks, their IT infrastructure was outdated, inflation was about 30 per cent and the currency was depreciating. The year before we bought it, NCB made a profit of US$6 million — in the year through September 2017, it made US$150 million and now it has a 44 per cent market share. Over the 14 years, it has made about US$1.5 billion in profits and paid about US$475 million in corporate taxes.” The fact he highlighted taxes paid highlights another aspect of Mr Lee-Chin’s approach to doing business. The Portland mantra is prosperitas cum caritate, or prosper with care for people, which speaks to his desire for his businesses to “not only do well, but also do good. I want every staff member to come to work believing there is a direct connection between their efforts and the well-being of the next generation,” Mr Lee-Chin said. He personally works on developing such a community-minded culture in his businesses, he added, striving to lead by example through his own personal life and values. Mr Lee-Chin was born in Port Antonio, Jamaica in 1951 and moved to Canada in 1970 to study civil engineering at McMaster University in Hamilton, Ontario. He went into the mutual fund industry and became a financial adviser at 26. Having achieved some success, at the age of 32, he borrowed money to buy $500,000 of Mackenzie Financial stock, which appreciated sevenfold over the next four years. He then bought a small Ontario investment firm called AIC Ltd with $800,000 of assets under management — 20 years later it was managing more than $15 billion. In 2009, he sold it to Manulife. Now he is chairman and CEO of Portland, which has invested heavily in the Caribbean region, owning stakes in wealth management companies, insurers, banks, telecommunications groups and the Wallenford Coffee Company, the largest cultivator of Jamaica Blue Mountain and Jamaica High Mountain coffee. He said there were three preconditions that he looked for in potential investments. “When all three are present, that gets us excited,” he said.
The first thing Mr Lee-Chin said his investment will bring to Clarien is to bolster its balance sheet, which would in turn help the bank to bolster its asset-management and trust services, as well as strengthening the back office and front office. Asked whether the bank would be likely to add to its staff, Mr Lee-Chin said: “That will be a function of how well we do over time. If we are successful, more staff would be a natural by-product.” And the advice he would give to any budding entrepreneur? “Understand the eighth wonder of the world, as it was described by Albert Einstein — compounding,” he said. “If you don’t understand compounding, it’s difficult to lead a successful life. It’s about reinvesting and growing. Investing the experiences you had yesterday to make you stronger tomorrow. Doing the same thing over and over, versus flipping from one thing to another. Persevering, bringing forth everything you’ve learnt to this point in your life.”
2017. December 13. Clarien Bank will be raising lending and savings rates next year after the US Federal Reserve raised its key interest rate by a quarter of a percentage point. The bank said today it had anticipated the US central bank’s action and it planned to increase deposit and savings rates, as well as its Bermuda dollar base lending rate. “Further details and an effective date will be declared in January 2018,” Clarien stated. “In addition to increasing published board rates, the bank will also be introducing a series of attractive promotional deposit products to provide its client base and the overall community with a variety of savings and investment vehicles to grow and save for the future.” Clarien borrowers will be advised via written notice of adjustments to their repayment requirements. Clients are encouraged to contact their relationship manager or lender for additional information.
2017. December 2. A company owned by Jamaican billionaire Michael Lee-Chin’s Portland Holdings is set to take a majority stake in the parent company of Clarien Bank. If the transaction is approved, it will be the third time in four years that the majority shareholding of the bank has changed hands. Clarien said it intended to retain its branding after the deal and that it will remain committed to Bermuda, its employees and its clients. Jamaica’s largest financial institution, NCB Financial Group Ltd, has reached an agreement with Clarien Group Ltd to become its majority shareholder and plans to take a 50.1 per cent stake in the company. The transaction has received the approval of the Bank of Jamaica and there has been no objection from the Bermuda Monetary Authority. The deal is awaiting final approval from David Burt, as Minister of Finance, under the 1981 Companies Act. Financial details of the agreement have not been disclosed. Edmund Gibbons Ltd, once the sole shareholder of Clarien, will retain a 31.98 per cent stake after the transaction. The remaining 17.2 per cent stake will be held by funds managed by Portland Private Equity, which is also part of the Portland group. James Gibbons, director of EGL, CGL and the bank, said the partnership with NCB would strengthen commercial ties with two highly respected institutions and bring wider opportunities for Clarien. He added: “We are very excited by our partnership with NCB, which is one of the most successful financial services groups in the Caribbean, and the broader Portland group which includes operations in Canada and other international markets. It will enable us to expand our offerings locally, regionally and globally.” Mr Gibbons said: “NCB shares our client-focused philosophy and a dedication to providing high-quality services and a superior customer experience. Our partnership with NCB and PPE reinforces Clarien’s position as one of the largest privately held financial institutions in Bermuda. It will enable us to offer a wider range of products to our customers and facilitate the growth that will ultimately provide job security and career opportunities for Bermudians.” Edmund Gibbons Ltd and Ontario-based Portland Private Equity last year injected $12.6 million into Clarien, which enabled it to exceed the capital regulatory requirements of the Basel III standard. Mr Lee-Chin is president and chairman of the Canadian-headquartered Portland Holdings group of companies, which includes NCB and PPE. He visited Bermuda last month as the keynote speaker at the Progressive Labour Party’s gala celebration at the Fairmont Southampton. NCB is the financial holding company for the National Commercial Bank Jamaica Ltd. Patrick Hylton, NCB president and group chief executive officer, said: “Bermuda is one of the world’s premier financial jurisdictions and our alliance with Clarien is consistent with the strategic investments and joint ventures NCB Group identifies as key to growing our regional interests and driving continued growth and shareholder value. Our investment in Clarien reflects not only our confidence in the quality and value of the bank’s expertise, experience and services but also those of Bermuda itself. “In addition to its unquestioned natural beauty, the island has a natural affinity for business. As home to many of the world’s leading financial companies, Bermuda is respected as a stable, sophisticated legal and regulatory jurisdiction well equipped to meet the needs of international high-net-worth and institutional clients and one that is committed to meeting global standards of compliance, regulation, and transparency. We are committed to contributing to the growth of Bermuda’s reputation to attract more business to the island and thereby create conditions that will benefit the economy as a whole.” Clarien Bank, previously known as Capital G Bank, was controlled by Edmund Gibbons Ltd until January 2014 when it sold a four-fifths stake to a group of investors behind the Bermuda exempted company CWH Ltd. The bank rebranded as Clarien after the amalgamation. But in February 2015, EGL acquired a 50 per cent stake in CWH and two months later reacquired the remaining shares it had sold in Clarien and resumed total ownership of the bank.
2017. April 3. Clarien Bank Ltd’s net profit more than doubled last year to $1.2 million as new lending grew strongly and operating expenses fell. However, non-performing and impaired loans made up 15 per cent of the bank’s loan portfolio — up from 14 per cent in 2015 — evidence that some borrowers are still struggling to keep up with repayments. Revenues fell 3 per cent to $55.1 million, year over year, while Clarien cut operating expenses by $2.4 million, or 5 per cent, to $44.7 million. The bank is owned by the Gibbons family through Edmund Gibbons Ltd. EGL and Portland Private Equity invested $12.6 million in the Clarien Group a year ago, a capital injection which enabled the bank to strengthen its total capital ratio — a key measure of financial strength — to 17.5 per cent as of the end of 2016. The $1.2 million profit was up 133 per cent from the $0.5 million earned in 2015. Clarien’s loan portfolio fell by $53.3 million to close the year at $809.7 million. The bank said this was due to a continuing trend of “clients using cash to pay down mortgages in order to avoid continued debt”. The shrinkage in the loan book led to a 4 per cent decrease in interest income from loans, mortgages and credit cards, to a total of $52 million. However, the accelerated payments trend was offset by strong growth in new lending, which more than doubled from 2015, climbing to $52.6 million — up by $30 million. Around 9 per cent of the loan portfolio — around $79 million — is made up of “impaired loans”, the bank said, while a further 6 per cent of loans were “non-performing”, or past due by 90 days or more. Ian Truran, Clarien Bank’s chief executive officer, said: “Although the continued general increase in Bermuda property prices is encouraging, the continued high level of non-performing loans is an indication that the island’s economy still faces challenges. “Clarien’s approach is to continue to work with borrowers facing challenges and therefore the improvement in non-performing levels will take time while we conservatively increase our reserves against troubled assets.” Clarien increased its provisions against bad loans to $26.1 million in 2016, up from $20.7 million a year earlier. More than a third of the cut in expenses was achieved through a $0.9 million reduction in salaries and benefits, while the remainder came from savings on IT expenses through completion of debit and credit card initiatives, improved office efficiencies and disciplined budgeting, the bank said. In the second quarter of last year, the bank launched a new electronic banking system called Clarien iBank, as well as Visa credit cards. Clarien Merchant Services was launched in the fourth quarter aimed at improving services for commercial clients. “The successful launch of these projects resulted in a substantial reduction in technology costs that contributed to a $2.4 million reduction in our operating expenses,” Mr Truran said. “It should be noted that the reduction was achieved at the same time as incurring $0.7 million in costs associated with the introduction of the Bermuda Deposit Insurance Scheme.” Mr Truran added that last year’s capital injection had left the bank “well-positioned for strategic growth and we look forward to the coming 12 months with increased confidence and energy”.
2015. April 8. The Gibbons family bought back control of Clarien Bank Ltd, just 15 months after it sold a controlling interest in the institution. The news was announced in an earnings announcement published yesterday. The statement did not specify why Edmund Gibbons Ltd (EGL) had repurchased the 80 per cent stake in the bank that it sold to CWH Ltd in January 2014. Asked the reasons for the Gibbon's’ resumption of full ownership, a Clarien spokesman said: “As a result of robust discussion within the bank’s strategic planning process it was agreed between shareholders that EGL once again take a sole ownership stake in Clarien Group Ltd (CGL). CGL will continue to explore arrangements with partners to allow for growth, expansion into new product areas, and in planning for Basel III compliance.” The terms of the deal were not disclosed. In January 2014, EGL sold a four-fifths stake in the former Capital G Bank Ltd to Bermuda exempted company CWH Ltd. Two of the founders of CWH, Ian Truran and Zoran Fotak, became co-CEOs, but Mr Fotak left the role in October last year. Two months later he took a new post as CEO of CWH — the holding company of the bank’s majority shareholder at that time. The Clarien spokesman said the CWH founders who would continue to be involved with the bank were Mr Truran as CEO, Keith Stock as chairman and David Carrick as chief financial officer. There was no mention of any role for Mr Fotak. In the bank’s statement yesterday, EGL director James Gibbons said: “On behalf of Edmund Gibbons Ltd and the Gibbons family, we are pleased to report that we have become sole shareholders of Clarien Group Ltd. We remain committed to expanding Clarien Bank Ltd’s financial services business by working with strategic partners that will support our overall investment strategy to deliver world-class products and services for residents of Bermuda and international clients from around the world. We will continue to work towards Basel III compliance as it is phased in given the extra responsibility that brings to us as a designated domestically, systemically important institution.” Clarien also revealed that net profit in 2014 slumped to $500,000, down from $3.6 million in 2013, representing an 86 per cent drop. The bank said that core earnings, which exclude one-time charges, rose 44 per cent. Net operating income was flat at $51.7 million. Borrowers’ struggles were also reflected in the bank’s results, as non-performing loans — 90 days or more past due — and impaired loans represented 13 per cent of Clarien’s total loans. Loans categorized by the bank as “impaired” totaled $62.4 million and represented 7 per cent of the loan book, up from 5 per cent in 2013. Specific provisions on the balance sheet against impaired loans increased to $18 million last year, up from $11.6 million in 2013. The value of total loans fell by 7 per cent to $876.4 million from $942.6 million in 2013. “Bermuda continues to be challenged by its current economic position as evidenced by some of our clients’ inability to service their debt payments,” Mr Truran said. As a result, net provisions on loan losses rose by 27.3 per cent from $7.7 million in 2013 to $9.8 million in 2014. We continue to work empathetically with our clients to facilitate their long-term financial successes and early indicators for the year show some improvement in the relevant sectors of the economy.” He added that the bank would be “strengthened by the increased support of EGL and the Gibbons family” with their return to full ownership. Mr Truran said the bank’s consolidated capital ratio improved to 15.52 per cent from 14.84 per cent. The bank’s statement added: “During the year, Clarien Bank undertook a strategic review of its property portfolio and determined that certain premises would no longer be required in the ongoing operations of the company. Therefore the Bank distributed a property to its parent company, CGL, at its carrying value as a common control transaction.” On the balance sheet, Clarien’s total assets fell by more than 11 per cent to $1.18 billion at the end of last year from $1.33 billion 12 months earlier. Deposits and interest owed to depositors totaled $1.08 billion at the end of 2014, down by more than $140 million or 11 per cent, compared to a year earlier. Summing up last year, Mr Truran added: “In 2014, Clarien Bank achieved its goal of becoming a more operationally efficient bank focused on service excellence, with a greater proportion of non-interest income, resulting in fewer risk-weighted assets on the balance sheet. Clarien Bank saw an increase in total revenues, and the decline in our profit was predominantly due to large, one-off expenses that will not have any continuing effect on earnings going forward.”
Until April 2015 the bank was part of Clarien Group Ltd, a wholly owned subsidiary of Bermuda exempted company CWH Ltd. The deal gave the newly formed Bermuda company a controlling interest in what was until April 22. 2014 the Capital G Bank Ltd. Edmund Gibbons Ltd, which had earlier wholly owned the institution, remains involved as a minority shareholder. Subsidiaries with their new names are Clarien Brokerage Ltd, formerly Capital G Brokerage Ltd; Clarien BSX Services Ltd, formerly Capital G BSX Services Ltd; Clarien Investments Ltd, formerly Capital G Investments Ltd; Clarien Nominees Ltd, formerly Capital G Nominees Ltd; and Clarien Trust Ltd, formerly Capital G Trust Ltd.
Charges a monthly checking account fee.
All four Bermuda banks charge at least $8 a month for current accounts and levy other banking fees and charges considerably higher than their USA, Canadian and UK counterparts. In services, facilities and competence the local banks benefit the economy generally and enjoy many advantages, especially to visitors and newcomers who, in their own home countries will not find any of their High Street banks with the same national and international range of easy Foreign Exchange and other facilities and services. But the Bermuda Government charges them some of the highest banking fees in the world. Plus, they pay millions of dollars in Payroll Tax for their labor-intensive staff. Thus their interest rates are lower, interest bearing checking accounts do not exist and bank service fees to consumers are the highest in the world.
In July 2011 Bermuda's House of Assembly parliament ( finally) enacted an insurance scheme to partially protect individuals, charities and small businesses, with the Deposit Insurance Act. Membership of Bermuda's Deposit Insurance Scheme [DIS] - see Bermuda Deposit Insurance Corporation (BDIC) below - is mandatory for all four commercial banks, the one deposit company licensed under the Banks and Deposit Companies Act 1999 and the sole credit union. The maximum threshold for compensation is, compared to the USA's $250,000 a mere $25,000, although that amount “could grow over time.” The legislation put the Bermuda Deposit Insurance Corporation [BDIC] in place to administer the scheme. In Bermuda, which has no lender of the last resort and no central bank, the safety net relies heavily on prudential regulation and supervision by the Bermuda Monetary Authority (BMA) which overall administers and regulates the scheme. Deposit insurance is a guarantee to depositors in a bank that they will be compensated up to a maximum specified amount of their deposits upon failure of that institution. This legislation came many years after The USA, UK, Canada and elsewhere enacted the FDIC and equivalents, and for significantly larger amounts than Bermuda's $25,000 where the BMA is the only banking-relevant regulatory authority and the relevant pieces of legislation are The Banks & Deposit Companies Act 1999 and The Banking Appeal Tribunal Regulations 2001. The BMA is responsible for the licensing, supervision and regulation of all financial institutions in Bermuda (including those conducting deposit taking, insurance, investment and trust business). Since 2009, the BMA has required all Bermuda banks to ensure they have a "capital buffer" which would keep them on a solid footing even in the case of a dramatic worsening of economic conditions. The BDIC deposit insurance of $25,000 per depositor is the result of a collaborative effort between financial regulator the Bermuda Monetary Authority (BMA), the Ministry of Finance and the Bermuda Bankers Association (BBA). Technical advice was provided by the International Monetary Fund. Deposit insurance is a guarantee to depositors in a bank that they will be compensated up to a maximum specified amount of their deposits upon failure of that institution. It has three main objectives, to protect small depositors; promote stability in Bermuda's financial system and economy by providing prompt reimbursement or access to insured depositors' funds; and promote competition between financial institutions in Bermuda. Under the legislation, membership of the scheme is compulsory for all relevant financial institutions. The premiums are paid by the banks as a fixed percentage of insurable deposits. The Bermuda Deposit Insurance Corporation has an appointed board of directors to run the scheme. The legislation also entails elements on protection from personal liability and preservation of confidentiality.Bank deposits in Bermuda banks or trust companies by US or other non-Bermudians are not covered by the US Government's Federal Deposit Insurance Commission (FDIC) which insures deposits of all kinds in all USA licensed banks up to $250,000 per depositor for all deposits, savings and individual retirement accounts.
Bermuda bank deposits are not covered by the UK Government's Financial Services Compensation Scheme (FSCS) - http://www.fscs.org.uk/ - under the UK Financial Services and Markets Act, 2000. It too offers a hugely more generous financial compensation than Bermuda, but significantly less than in the USA. Currently, individual UK-based bank clients are insured up to £75,000 pounds sterling. However, from July 2015 this will be upped to £1 million for those who have large sums in their accounts arising from the sale of their homes. (There is no such similar plan for Bermuda, where most houses sell for well over Bda $1.5 million and some for as much as $20 million and the average condominium sells for over $800,000). Also, in the UK, the FSCS pays compensation usually within 7 days of a bank, building society or a credit union failing, except for more complex claims that might take 20 days. Most recently, the FSCS declared it may not even be necessary to claim from it even when a financial organization fails because it ensures customers will have continuous access to their funds via another FSCS mechanism whereby accounts are transferred to another financial organization in the event of a bank or similar going bust. However, continuous access applies only to sums within the £85,000 threshold, not to temporary large balances of up to £ 1 million caused by the sale of a property. No such provisions in any of these categories are made in Bermuda.
In addition, they are not licensed to conduct banking business in the United States or Canada.
Nor are they covered by any Canadian or European or any other country whose nationals live and/or work in Bermuda.
Investment vehicles and services of Bermuda banks have not been registered or licensed under any United States securities legislation and are not being offered, directly or indirectly, in the United States or in any of its territories or possessions or areas subject to its jurisdiction or to its citizens or persons thereof.
The Bermuda Government has not approved any local bank as the depository of public funds. Instead, it awarded this to the Bank of New York.
|Laws of Bermuda||Acts, Regulations and Statutory Instruments|
The Bank of Bermuda/HSBC and Bank of Butterfield have Automatic Teller Machines (ATMs) scattered throughout Bermuda, plus full service offices in and beyond the City of Hamilton. Most American, Canadian & other visitors will find that if they need cash in Bermuda, local ATMs from either of the two largest local banks will service them. But the dollar notes they dispense will be in non-exportable Bermuda dollars only (which cannot be cashed overseas).
This established a comprehensive bank insolvency framework that meets international standards and operates independently of general insolvency law. Amendments to legislation have been made to allow the BMA to license money-service businesses. In the past, the BMA has been unable to license these businesses because the money service business regulations do not provide sufficient details for appropriate oversight.. However, changes to 2007 legislation allow the BMA to license and regulate the industry. Legislation governing the insurance and reinsurance sectors, also policed by the BMA, are being updated in line with global developments. Bermuda banks can address the Island-wide need to increase the flow of credit to help re-flate the economy, providing Bermudians with the support they need for their business ventures, their educational ambitions and their dreams of home ownership.
Bermuda banks charge between 4 and 5 points more for foreign currency purchase transactions than US, Canadian, British, etc banks do. For example, on February 1, 2013, see the UK rate of 1.6266 at http://www.bm.butterfieldgroup.com/Business_Corporate/treasury/Foreign_Exchange_Rates/Pages/Home.aspx compared to http://www.hifx.co.uk/.
The Bermuda Dollar, not an exportable or international currency, is not available from any bank in USA, Canada, UK, etc. and only usable within Bermuda. But for all non-Bermudian visitors the US Dollar - on which the Bermuda Dollar is based and in Bermuda is worth the same - is accepted everywhere in Bermuda despite the fact that Bermuda is not part of the USA politically and is not a US Commonwealth country like Puerto Rico or the USVI, etc. Until 1970 but not thereafter, Bermuda had its own local pound sterling notes, based on UK sterling. All visitors from the UK, Canada, Europe and elsewhere should bring US dollars only. If visitors who purchase goods and services in Bermuda get their change offered in Bermuda dollars they should ask if it can be exchanged for US dollars.
Founded in 1994. The organization that in Bermuda represents the trust and related industry. BALT is a forum for the interests of its stakeholders and acts as a representative body for all 30 companies licensed by the Bermuda Monetary Authority to carry on trust and related business in Bermuda. BALT makes representations to Government and is often invited to deliver submissions and reports on trust legislation, fiduciary ethics, good practice and regulation of the industry. The Association is a key contributor to the Bermuda Business Development Agency's strategic plan to promote existing international business and actively develop new business in Bermuda.
Since November 2007. Funded by its members. Created its own (voluntary) code of conduct for its member-banks. Serves as the main representative body for banks and deposit taking/lending firms on the Island. Similar to banker's associations in other financial jurisdictions, an industry think tank, lobby group and a forum for increased cooperation on non-competitive issues among the Island's banks. Stated mission is to be a leading contributor in the development of public policy on the financial services sector and ensure the legal and regulatory framework governing banks operates in an efficient, effective and fair manner. All the Island's chartered banks and lending/deposit taking institutions are eligible for membership and currently all banks doing business in Bermuda are members. The Bermuda Monetary Authority, responsible for the licensing, supervision and regulation of all financial institutions in Bermuda (including those conducting deposit taking, insurance, investment and trust business), is an ex officio observer of the BBA.
First Bermuda Banknote, 1883. A Canadian $5 note printed for the Merchant Bank of Halifax and converted to a £1 1 shilling (one guinea) note for use in Bermuda.
The Merchants' Bank of Halifax (later, the Royal Bank of Canada), established in Halifax in 1864, opened an agency in Bermuda in 1882 via the local Butterfield's Bank. On October 6, 1883, it issued its own money for use in Bermuda. It began circulating a $5 Canadian note printed by the American Bank Note Company in Ottawa for its bank in Halifax and converted to a one pound, one shilling (guinea) note for use in Bermuda. This Canadian/Bermudian note has considerable historical value as the first "Bermudian" paper money to arrive in Bermuda; some 31 years before Bermuda got its own official currency notes. Later, the Merchants' Bank of Halifax divorced itself from Butterfield's Bank in Bermuda and ran its own branch bank in Bermuda for four years. Thus it also became the first (and only) non-Bermudian bank in Bermuda. Later yet, the Merchants' Bank of Halifax's Bermuda operation was bought out by banking newcomers in Bermuda who established from it the present day Bank of Bermuda Ltd.
First Bermuda Government £ sterling note of 1914, also printed by the American Bank Note Company in Ottawa.
BMA House, 43 Victoria Street, Hamilton. P O Box 2447, Hamilton HM JX. Tel: (441) 295-5278. Fax (441) 292-7471.
2018. December 11. New, wide-ranging fee increases by the Bermuda Monetary Authority have been approved by the Bermuda Government. However, the changes will be phased in over a three-year period rather than two years as had originally been proposed. A review this year concluded that the BMA will require up to 39 additional full-time staff by 2020 to continue effectively discharging its duties, while its annual operating costs have been projected to rise to $61 million by 2020, up $11.7 million on last year. Against this backdrop, Curtis Dickinson, Minister of Finance, passed an order in the House of Assembly on Friday that provides for amendments to the fees charged by the BMA. Insurance and reinsurance companies, banks, corporate service providers, trusts and credit unions will be among those affected by the changes. Mr Dickinson made reference to the review conduced by the BMA with assistance from an international consulting firm, that resulted in fee change proposals. The authority recorded a budget deficit of $1.63 million last year, its fifth annual shortfall in the last decade. It expects to record a further operating loss this year. It has previously covered budget shortfalls from its general reserve account. Last year its reserves shrank by $2.1 million. As a regulator, the BMA works to protect and enhance Bermuda’s reputation and position as a leading international financial-services centre. It has said it is enhancing its risk-based supervision approach, coverage and service levels; meeting evolving international standards, but to do so it needs to further enhance its operations and add to its supervisory resources. One way this can be achieved is by raising fees. Mr Dickinson said the BMA recognized market conditions remain challenging in a number of regulated sectors, and this had been taken into account when the proposed revised fees were assessed. During the global financial crisis that started around 2008, and continuing in recent years, fee increases by the BMA were moderated to reduce the impact on the financial-services industry. Mr Dickinson said: “This has, however, contributed to the authority operating at a deficit, with resultant budget shortfalls being covered from existing reserves.” He added: “Consequently, certain existing fees will be adjusted and/or new fees be introduced to reflect the authority’s resource utilization for these ongoing supervisory activities. Also, the basis on which fees are charged will be simplified so that entities will find it easier to determine what fees they need to pay.” One of the four guiding principles that will inform the revised fees is the need for the island to maintain its competitiveness and “account for pricing relative to peer regulatory bodies to ensure Bermuda remains competitive”. Mr Dickinson said that during the consultation process and subsequent meetings between the BMA and industry stakeholder groups, the most prevalent comment was the need for the fee changes to be phased in over a longer period of time, which has resulted in the proposed timescale being altered from two years to three. He added: “The insurance industry’s request that the authority have greater flexibility regarding fees to be applied in specific circumstances, such as where affiliated insurers have similar risk profiles and in cases where combined application fees would otherwise be payable, has also been addressed via separate creation [in the Insurance Act] of a power to exempt or reduce fees.”
2018. August 27. Bermuda’s financial-services regulator has hired a fintech adviser to ramp up its expertise in digital-asset business supervision. Moad Fahmi, CFA, FIA, joins the Bermuda Monetary Authority as senior adviser, supervision (financial technology). Mr Fahmi will be responsible for the supervision of digital-asset businesses under the Digital Asset Business Act 2018. He has held numerous regulatory and financial services positions in his career, most recently as the director, fintech and innovation, at the Autorité des Marchés Financiers, the financial-services regulator in Quebec, Canada. At the AMF, Mr Fahmi was instrumental in the deployment of the fintech strategy, which included the development of a laboratory and sandbox that worked directly with fintech firms. Mr Fahmi also collaborated with fellow AMF supervisors to develop regulatory positions on pressing fintech issues and led a fintech training programme that was delivered to over 250 employees. Before joining AMF as a financial markets specialist in 2012, Mr Fahmi held senior manager positions at Laurentian Bank of Canada and Business Development Bank of Canada in 2011 and 2006, respectively. Jeremy Cox, BMA CEO, said: “The authority continues to recognize the growing importance of disruptive technological innovation in the global financial services industry and remains committed to providing a regulatory environment in Bermuda that strikes the right balance between economic growth and financial stability.” Craig Swan, managing director, supervision, who will be Mr Fahmi’s direct manager, said: “Never before have innovative new technologies been such a focus for the BMA; we will continue to incorporate new technology into our supervisory processes to enhance efficiencies and to regulate businesses that utilize the new technology. Because of Mr Fahmi’s industry experience in fintech, we expect he will quickly integrate into his new role and help guide the BMA team on its journey of digital-asset business innovation. The BMA is one of the few jurisdictions with a robust regulatory framework that was specially designed to appropriately address the unique risks arising from digital-asset business. Mr Fahmi will be supported by a dedicated team of professionals to supervise the sector.”
2014. November 8. Bermuda’s financial watchdog is to get new powers to police banks. The Bermuda Monetary Authority (BMA) would be able to intervene in case of “a troubled bank.” The move is in line with International Monetary Fund recommendations made in 2008. To address this recommendation, the Government has brought legislation to establish a special resolution regime for banks licensed in Bermuda. The purpose of this resolution is to address the situation where all or part of the business of a bank has encountered, or is likely to encounter, financial difficulties that cannot be resolved by any other means. The Banking Special Resolution Regime Act 2014 established a comprehensive bank insolvency framework that meets international standards and operates independently of general insolvency law. Amendments to legislation have been made to allow the BMA to license money-service businesses. In the past, the BMA has been unable to license these businesses because the money service business regulations do not provide sufficient details for appropriate oversight.. However, changes to 2007 legislation allow the BMA to license and regulate the industry. Legislation governing the insurance and reinsurance sectors, also policed by the BMA, are being updated in line with global developments. Bermuda banks can address the Island-wide need to increase the flow of credit to help re-flate the economy, providing Bermudians with the support they need for their business ventures, their educational ambitions and their dreams of home ownership. Government was also examining a “reverse mortgage” scheme and talking to the Bermuda Bankers’ Association in an attempt to allow seniors to access money locked up in their homes. There are many elderly people in Bermuda who own their own homes, many valued at more than a million dollars, but who do not have the cash flow to maintain an adequate lifestyle or to pay for rising healthcare costs. Reverse mortgages can be an option for people who want to turn substantial home equity into cash in order to ease these challenges. Banking remained an important earner of foreign exchange for the Island. The Government is concerned about shrinkage in the banking sector, in terms of its lending policies and employee numbers. The Ministry of Finance, as a result, is examining policy reforms to expand and diversify the banking sector and, by extension, Bermuda’s foreign exchange earnings and the capacity for job creation. The Government is in talks with the banks and other interested parties with a view to changing bank and deposit company law. Accountancy firms could also offer community support by donating time for audits and reviews of community clubs required under the Charities Act. Accounting firms can adopt a club in this regard, freeing up precious dollars to support their worthy operations.
As a result of the enactment of the USA PATRIOT Act (Public Law No. 107-56 - October 26, 2001), the U.S. Department of the Treasury has issued regulations requiring U.S. financial institutions to obtain certain information relating to foreign banks that maintain relationships at U.S. financial institutions using a certification form. This certification is needed to comply with provisions of the USA Patriot Act. Bermuda banks are involved when they, as foreign banks, maintain relationships at US financial institutions, using a certification form. This certification is needed to comply with provisions of the USA Patriot Act, and a relevant Patriot Act Certificate is available for inspection at the Bermuda banks concerned.
Incoming visitors from Europe should note that the Euro is not accepted anywhere in Bermuda as a trading currency. They should use US dollars. But all Bermuda's banks offer the Euro - € - to all visitors and business executives or representatives heading for Ireland and EU countries of Europe. Avoid using Euro traveler's checks, instead use credit or debit card cards at ATMs of banks in Euro countries.
2017. March 17. A Bill to introduce a new tax for financial services won narrow support in a House of Assembly vote after Opposition MPs argued it would result in higher fees for “Mr and Mrs Bermuda”. Finance minister Bob Richards admitted that there was no initial consultation with any of the affected parties with regards to the Financial Services Tax Act 2017. The Bill came to a vote, with Government Whip Susan Jackson counting 15 votes against, and 15 votes in favour, herself casting the deciding vote in favour making 16 in favour. The Bill was branded “The Airport and America’s Cup Tax Bill” by Progressive Labour Party MPs Diallo Rabain and Kim Wilson. However, Mr Richards countered that the Bill “is the PLP deficit tax increase” rather than an “airport or America’s Cup tax”. The Act will see money service businesses hit with a 1 per cent tax on their aggregated incoming and outgoing transmission volume. That figure was reduced from the 5 per cent announced in the Budget Statement, after consultation with the business services industry, according to Mr Richards. Banks will pay 0.005 per cent of their consolidated gross assets, while local insurance companies will have a 2.5 per cent tax on gross premiums earned, excluding premiums from health insurance. Mr Rabain and Ms Wilson claimed that the new tax on banks, insurance companies and money service businesses, expected to generate more than $11 million per year, would eventually impact “Mr and Mrs Bermuda”. Ms Wilson, shadow health minister, said: “If I am an insurance company, I will not eat that — I’ll pass it on to the consumer.” Speaking on “astronomical” bank fees, she described the Bill as “reverse Robin Hood, that takes money from the poor, or in this case the middle class, and gives it to the rich”. Shadow Attorney-General Michael Scott echoed concerns about the equity of the Bill and PLP backbencher Wayne Furbert asked: “Is this the best they can do?”, while deputy Opposition leader Walter Roban said the move could bring concern to the business community. Opposition leader David Burt, who pointed out that Bermuda is “the most expensive place in the world to live”, also insisted this “Act here will make it more expensive to fill the revenue hole to pay for the Minister’s projects”. He also noted that the tax on money services businesses had been dropped, “just like the mysterious customs duty hikes, which have magically disappeared”. Mr Richards stressed that the “overriding objective and the overriding risk to the Bermuda economy, to Bermuda as a country and to the Bermudian people is the excessive debt that this Government has”. Noting that “nobody likes to pay more taxes”, he added “we made a decision because nobody was going to agree to it”. Mr Richards said the Government had made a decision to reduce the deficit “that we inherited from the other side”. Responding to questions from the Opposition about why the tax on money service businesses had been reduced to 1 per cent, Mr Richards said 5 per cent was deemed “way too high” after consulting with stakeholders of the business service industry. But he added that it is “really not that big a deal in so far as the dollar amount of the taxes raised” because money service businesses “are very small compared to the business operations of the banks and insurance companies”. But, pressed by Mr Burt about what consultation was made with the money service business before the 5 per cent was set, Mr Richards admitted that there was none. And when Mr Burt questioned what consultation was done with the banks and insurance companies, Mr Richards conceded that “this tax was not arrived at with prior consultation with the members involved”. He added: “We used comparative numbers with some other similar jurisdictions to Bermuda.” And when pressed what these were, he said: “Mainly the Bahamas — these rates are very similar to what they use.” MPs voted along party lines, with Independent MP Shawn Crockwell voting in favour.
Those likely to be affected by FATCA include US citizens and green card holders resident in the US and living abroad such as Bermuda who have foreign financial bank accounts, financial interests and other holdings; US residents for income tax purposes (those who do not have a US passport or citizenship but have resided in the US long enough to meet the substantial presence test), and others with US connections such US owned foreign entities. Also liable are US-classified foreign financial institutions and non-financial foreign entities including all those with US proprietary investments, US account holders, or other US financial dealings. FATCA cooperation is both encouraged and enforceable in Bermuda because Bermuda has signed Tax Information Exchange Agreements (TIEAs) in the last few years with the United States and other countries. TIEAs, tax treaties, and Intergovernmental Agreements all aid in mutual information exchange cooperation. In cases where tax evasion, etc, is suspected or determined, the US Internal Revenue Service has profound regulatory powers (agreed on by the TIEAs and tax treaties) to request detailed significant confidential information on specified US individuals and related parties.
2014. August 19. Bermuda, like many other areas in the world, became a signatory to the USA's Foreign Account Tax Compliant Act (FATCA). It was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. FFIs are encouraged to either directly register with the IRS to comply with the FATCA regulations (and FFI agreement, if applicable) or comply with the FATCA Intergovernmental Agreements (IGA) treated as in effect in their jurisdictions.
May 22, 2013. More than 250 local industry professionals were told “now is the time to take action in preparation for FATCA”, during KPMG’s second FATCA forum, held earlier this week at the Fairmont Hamilton Princess. Building on the topics raised during the 2012 FATCA forum, the interactive session again asked the question “Are you ready for FATCA?” and delivered the message that as we approach the looming FATCA threshold dates, it is clear that FATCA is not going away. Discussion covered a wide range of topics, including FATCA from a global perspective; Bermuda’s response to FATCA; the Intergovernmental Agreement (IGA) models; FATCA’s potential impacts on business in Bermuda; and the cost of compliance and impact on customers, investors and counterparties. Describing why KPMG in Bermuda felt it was important to run a second FACTA forum for Bermuda professionals, KPMG managing director Charles Thresh, said; “This US legislation will have far-reaching consequences for the financial industry worldwide and Bermuda is no exception. If companies haven’t yet started planning for FATCA, it is not too late to become compliant, but the window is closing and the time to do so is now.” A key component of the panel portion was discussions around the IGA models, with particular interest on the differences between Models 1 & 2, the potential benefits and impacts of a Model 2 IGA, and the potential impact of FATCA on Bermuda’s insurance, funds, trust and banking industries. Additional analysis was also sought around the final FATCA regulations, as issued January 17, 2013, and a high degree of interest was shown around the compliance timeline, strongly echoing last year’s forum. In the wake of the timeline discussion, consensus again reflected that the time for Bermuda companies to act on FATCA is now. Describing the global implications of planning and preparation, David Neuenhaus, KPMG global FATCA lead partner said; “How companies transition to FATCA compliance will have a significant impact on their relationships with their customers, investors, counterparties and services providers. Companies who are early adopters of a robust compliance programme will have the competitive advantage — so a timely response is key.” This year’s forum was led by Charles Thresh, Managing Director of KPMG Advisory, Bermuda with keynote address provided by KPMG Global’s David Neuenhaus and Daniel Dzenkowski, and additional local market insights from KPMG FATCA team members including Catherine Sheridan Moore, James Berry and Will McCallum. In addition, valuable industry insights were provided by Kiernan Bell, managing partner, Appleby; Alison Morrison managing director, Oyster Consulting; Peter Pearman, partner CD&P; and Lyndon Quinn of HSBC.
On October 11, 2012 it was announced in the Royal Gazette daily newspaper of Bermuda that Bermuda’s four banks are facing a 2013 deadline to supply a list of all accounts held by US citizens to the US tax authorities. Failure to do so would mean the local banks would face a 30 percent withholding tax on all the many transactions they do with the USA. The obligations have been placed onto all non-US financial institutions by the Foreign Account Tax Compliance Act (FATCA), enacted by the US Congress in 2010. For Bermuda banks, compliance may entail a lot of work. As well as the thousands of US guest workers on the Island, there are many dual-nationality Bermudian-Americans, and spouses of Americans, people with an American parent and green card holders, who fall into the category of “US persons” whether or not they possess a US passport. The USA is one of few countries in the world that taxes its citizens living overseas on the income they earn outside the US. With the US Government’s national debt up around the $16 trillion mark, the Internal Revenue Service (IRS) is seeking to maximize tax revenue — and a growing focus is Americans overseas that may be slipping through its net. A recent visitor to Bermuda was Anne Hornung-Soukup, finance director of American Citizens Abroad (ACA), an advocacy group which has long fought for taxation based on residency rather than citizenship, as practised by most countries. In an interview she outlined her concerns about FATCA. "What FATCA means is that every financial institution in the world outside the US will effectively be an instrument of the IRS. How it will work in practice is posing a lot of problems. They’re struggling to put the system in place. There are a couple of models being discussed. The first is that the information from the bank goes straight to the IRS. For them to give this type of information directly to a foreign government is against the law in many countries. In the second model the information would go to the domestic authorities, for example the Bermuda Government, who would then pass it onto the US Government.” Some European governments, including the UK, have agreed to provide account holders’ information to the IRS on the condition of reciprocity. Germany, for example, has reportedly been particularly vocal about the need for US banks to supply information about German account holders in return for their Fatca compliance. Some have suggested that the clampdown could backfire, if institutions or countries choose not to comply with FATCA, and their clients and residents pull their money out of US investments. US citizens resident overseas have been required to report their US bank accounts and file tax returns for decades, but only in recent years has the IRS been really clamping down on compliance. For more information on FATCA, visit http://www.irs.gov/Businesses/Corporations/Summary-of-Key-FATCA-Provisions
All who work in or have business dealings in Bermuda or who visit there on vacation should note that Bermuda, uniquely in the economies of the international business centers, has a Foreign Currency Purchase Tax (FCPT). It applies to the purchase of all non-local currencies including the US Dollar. In theory the Bermuda Dollar is on a par with the US Dollar but in in fact it is worth less. Why? Mostly on account of the FCPT, also because of Bermuda bank currency processing charges, in addition to the FCPT applied on every transaction. On February 26, 2010 the Bermuda Government doubled this tax, from one half of 1% to a full 1% per transaction.
This includes all purchases of foreign currencies for travel and business purposes and all telegraphic (wire) transfers of monies from Bermuda to individuals and businesses abroad. This means that in addition to bank charges built into the cost of wire transfers, government alone will now charge consumers $1,000 for every $100,000 taken or wired abroad. There is no Government Receipt given for this FCPT charge. The local-only Bermuda Dollar is not exportable. It is not used by traders world-wide. It is not cashable or exchangeable by any foreign banks. It is used only by local citizens and residents - not by international companies based in Bermuda (all of which use US dollars).
Currently, none independent of the Bermuda banks above.
Should not be brought by newcomers, tourists or visitors. No longer accepted or issued by any Bermuda banks, hotels, guest houses or other accommodation or any restaurants or stores.
No longer usable in Bermuda, see above story
February 8, 2019
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