Over the past six months, Butterfield Bank has been a great trade, beating the S&P 500 by 19.1%. Its stock price has climbed to $45.36, representing a healthy 24.8% increase. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy NTB? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does Butterfield Bank Spark Debate?
Founded in 1784 as one of the oldest banks in the Western Hemisphere, Butterfield Bank (NYSE: NTB) provides banking, wealth management, and trust services to individuals and businesses in select offshore financial centers including Bermuda, Cayman Islands, and the Channel Islands.
Two Things to Like:
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.
Butterfield Bank’s net interest income has grown at a 30.8% annualized rate over the last four years, much better than the broader bank industry.
2. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity, or ROE, quantifies bank profitability relative to shareholder equity — an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.
Over the last five years, Butterfield Bank has averaged an ROE of 20.9%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Butterfield Bank has a strong competitive moat.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income.
Unfortunately, Butterfield Bank’s 1.9% annualized revenue growth over the last five years was tepid. This wasn’t a great result, but there are still things to like about Butterfield Bank. 
Final Judgment
Butterfield Bank’s merits more than compensate for its flaws, and with its shares outperforming the market lately, the stock trades at 1.6× forward P/B (or $45.36 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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