The Bank of N.T. Butterfield (TKR: NTB) will offer 10.6 million shares at an expected price range of $22 to $25 on Friday, September 16, 2016. If the underwriters price the IPO at the midpoint of that range, N.T. Butterfield will have a market capitalization of $249 million. N.T. Butterfield expects to raise $305.8 million through the issuance of its shares. It filed for the IPO on August 4, 2016, and underwriters include: Goldman Sachs, Citigroup Global Markets, Keefe, Bruyette & Woods, and others.
Business Summary: Full Service Bank and Wealth Manager Based in Bermuda
The Bank of N.T. Butterfield & Son Limited provides various specialized financial and banking services. The company operates in six segments: Bermuda, Cayman, Guernsey, Switzerland, The Bahamas, and United Kingdom. It offers current and checking accounts, savings accounts, call accounts, and fixed-term deposits; personal loans, mortgages, home equity loans, and overdraft protection services; debit and credit cards; and Internet and automated teller machines banking services.
The company offers investment solutions and services, such as investment products, brokerage, and portfolio management services; home and contents, vehicle, yacht and pleasure craft, creditor life insurance, and credit card balance protection insurance products; and trust and estate services, including trust management, personal trust, wills and estate planning, company management, insurance trust, purpose trust, and special purpose vehicles.
On the commercial side, N.T. Butterfield provides commercial credit products, such as mortgages, loans, foreign exchange facilities, overdraft facilities, and letters of credit; cash management and asset management solutions; unit, bond, voting, institutional insurance, and reinsurance trusts, as well as collateral trusts/special purpose vehicles services; pension plans and retirement savings trusts; treasury and money market services; and merchant services, as well as purchases and sells securities.
Further, the company provides custodial services; wealth management services, including investment management, advisory, and brokerage services; private banking; and payroll, remote banking, fiduciary and ancillary, and administered bank services.
The bank was founded in 1858, and serves a variety of clients including SMEs, individuals, and privately owned businesses. As of June 30, 2016, the bank held $11.3 billion in total assets, $3.9 billion in net loans, $10.1 billion in customer deposits, $101.3 billion in trust assets under administration, and $4.8 billion in assets under management. It has approximately 1,088 employees.
(Bank Of N.T. Butterfield & Son Ltd., SEC Filing)
Use of Proceeds
Bank of N.T. Butterfield intends to use the net proceeds of this IPO for general corporate purposes and for potential future refinancing of its issued and outstanding preference shares.
Executive Management
CEO Michael Collins has been in his current position since September 2015. His previous experience includes positions at Morgan Guaranty Trust Company, Bank of Bermuda, and HSBC Bank Bermuda. Mr. Collins holds a BA in Economics from Brown University.
CFO Michael Schrum has served in his position since September 2015. His previous experience includes senior financial positions at HSBC Bank Bermuda in London, New York, and Bermuda. He is a Chartered Financial Analyst and a Fellow of the Institute of Chartered Accountants in England and Wales. Mr. Schrum holds Master's (University of London) and Bachelor's (Southern Denmark Business School) degrees in Economics.
Tough Competition in the Financial Service Industry
The financial service industry is highly competitive both domestically and internationally. Due to the trend towards consolidation, N.T. Butterfield's largest competitors are banks which offer a broad range of products and services. In the global banking marketplace, N.T. Butterfield faces competition from the largest retail and commercial banks, investment banking firms, and brokerage firms. These include HSBC Holdings, J.P. Morgan Chase, BNP Paribas, Bank of America and Deutsche Bank. In Bermuda specifically, competition comes from Bermuda Commercial Bank and Clarien Bank.
Financial Performance
In 2015, N.T. Butterfield generated $379.5 million in net revenue before provision for credit losses and other gains/losses. This figure was up $6.1 million from 2014. Net income in 2015 was $77.7 million, down from $108.2 million in 2014. According to management, the difference was largely driven by non-core expenses, including restructuring and business acquisition costs. As of June 30, 2016, the bank had $11.28 billion in total assets and $10.47 billion in total liabilities.
Conclusion: Consider Investing
In the most recent quarter, seven financial firms have gone public and have had an average return of 11.8%. N.T. Butterfield is positioned to continue this streak of strong performance for financial service firms going public. NTB has shown high return on investments and is well-backed by underwriters.
We recommend this IPO and we expect the bank will pay a solid dividend to its shareholders.
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