Moody's Ratings affirms Butterfield Bank (Channel Islands) Limited's long term issuer rating of BAA1, with a stable outlook
Moody’s Ratings has affirmed the long-term issuer rating of Butterfield Bank (Channel Islands) Limited at BAA1, with a stable outlook. The rating reflects the bank’s strong capital position, solid profitability, and conservative balance sheet management. The agency highlighted the bank’s leading market presence in the Cayman Islands and its niche focus on hedge funds and retail clients as key contributors to its financial stability.
The upgrade of the bank’s long-term foreign-currency issuer rating to A2 from A3, along with the affirmation of its baseline credit assessment at BAA1, underscores Moody’s confidence in the institution’s ability to maintain its performance trajectory. The stable outlook indicates that the agency expects the bank to continue its disciplined approach to risk management and capital generation.
However, Moody’s also noted ongoing challenges, including concentration risks in both loans and deposits, as well as the bank’s reliance on less-stable funding sources. The agency pointed to a less-stable funds ratio of approximately 37 percent. Additionally, large unrealized losses on the bank’s available-for-sale and held-to-maturity securities portfolios remain a factor in its capital assessment.
Despite these challenges, Butterfield’s capital buffers remain robust, with Moody’s-adjusted tangible common equity at nearly 30 percent of risk-weighted assets as of September 30. The bank’s high liquidity position, with high-quality liquid assets accounting for 43 percent of tangible banking assets, further supports its credit profile.
Moody’s also emphasized that compliance risk remains elevated due to the bank’s offshore operations, though it acknowledged maturity of Butterfield’s anti-money laundering program and its track record of low operational losses. The agency noted that the bank is likely to receive government support, given its systemic importance and historical precedent.
