Banks In Bermuda

Article bySayantan Mukhopadhyay
Edited byPallabi Banerjee
Reviewed byDheeraj Vaidya, CFA, FRM

What Are Banks In Bermuda?

Situated in the heart of the North Atlantic Ocean, Bermuda is a territory of the British island. Bermuda’s economy has been primarily based on light manufacturing and tourism industries. But, in the last few years, Bermuda has been attracting a lot of international exposure.

Banks in_Bermuda

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As a result, it is gradually becoming a popular global business destination. The banking system of Bermuda is not as progressive as one wants to think. But things have been changing, and the banks in Bermuda have been performing well as per the last report received in June 2017. The consolidated banking assets of Bermuda as per the statistics of 2016 are $22,700 million. And the deposit guarantee is $25,000.

Banks In Bermuda Explained

Banks in Bermuda is a very interesting topic because of the famous banks situated in it. These banking institutions provide their valuable services to both domestic and international clients. They have become famous due to the exceptional service and a wide variety of financial products provide to clients, which are often customized to suit their needs.

The banking sector operating in the Bermuda region is well known for its stable and secured financial systems. Customers have the least amount of worry regarding information and financial data leakage, credit and liquidity risk, money laundering, etc. This is very important to maintain a stable banking system in a country because it creates a sense of trust and faith from the customers and instigate them to invest more, leading to better utilization of banking services and circulation of money in the economy.

The above is an essential element for the overall development of the country. The banking sector in Bermuda offers such a secure atmosphere. However, due to the ever-changing landscape in the banking sector at a global level, there have been a number of changes in the island country’s banking system too. There has also been a change in the rules, regulations and type of services rendered by them. Therefore, in case any investor of customer wants to take the services of these banks, it is necessary to get updated information regarding them as given.

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Structure

Now let us dive deeper into the structure of the financial system of the country.

The peculiar thing about Bermuda is there are only four banks in Bermuda. So even if Bermuda is called an offshore international center of business and insurance, we cannot call it an international banking center.

Many international banks get the allowance to register in offshore locations as banks, and these international banks have no issues operating in these countries. However, in Bermuda, things are much different and strange. Bermuda does not allow these international banks to get registered and work.

This approach reduced the whole banking sector in Bermuda by $1.49 billion during the last year.

List Of Top 4 Banks

In this section we will understand in detail about the top 4 banks operating in the region, their history, value of financial assets they manage, each of their operating procedures, how they have grown over the years and successfully established themselves in the market in a very healthy competition with each other.

  1. Butterfield Bank
  2. HSBC Bank of Bermuda Ltd.
  3. Clarien Bank Limited
  4. Bermuda Commercial Bank Ltd. (BCB)

Let us look at these banks as per the size of the assets acquired by them: –

#1. Butterfield Bank:

 Butterfield, the biggest bank in Bermuda, has acquired around $11.1 billion in total assets.  It has also captured around 38% of the local banking market. Like any other local bank charges its customers a monthly fee for checking accounts. Till the end of 2017, the bank has a target of reaching a 60% efficiency ratio because it has missed its mark of achieving a similar efficiency ratio from March to June 2017.

During these three months, the bank’s non-net interest expensesInterest ExpensesInterest expense is the amount of interest payable on any borrowings, such as loans, bonds, or other lines of credit, and the costs associated with it are shown on the income statement as interest expense.read more were $75.3 million, around $9.5 million more than the previous year. Even though Butterfield bank has a reputation of about 160 years, 2017 is a new era for them because, in 2017, they put behind the subprime mortgageSubprime MortgageA subprime mortgage is a loan against property offered to borrowers with a weak or no credit history. Since the risk of recovering is high, the interest rate charged on such mortgages is higher so that the lender can recover a maximum amount at the beginning of the loan.read more crisis of the US and bent them down to their knees for a long time. As of February 2017, Butterfield bank has generated over $115.9 million as profits.

That is great news because the profits of 2017 have been almost $38.2 million more than 2016’s profits. Another noteworthy thing that we should mention is Butterfield’s huge shareholders’ list, including some prominent names on Wall Street. It is the sweet fruit of the bank’s stock exchangeStock ExchangeStock exchange refers to a market that facilitates the buying and selling of listed securities such as public company stocks, exchange-traded funds, debt instruments, options, etc., as per the standard regulations and guidelines—for instance, NYSE and NASDAQ.read more for public trading and investment. This allows a private company to raise the capital for different purposes.” url=”https://www.wallstreetmojo.com/initial-public-offering-ipo/”]initial public offering[/wsm-tooltip] on the New York Stock Exchange in September 2016.

#2. HSBC Bank of Bermuda Ltd.

HSBC Bank of Bermuda Ltd. is the second bank in terms of the size of the total assetsTotal AssetsTotal Assets is the sum of a company's current and noncurrent assets. Total assets also equals to the sum of total liabilities and total shareholder funds. Total Assets = Liabilities + Shareholder Equityread more in Bermuda. It has acquired assets of around $8.7 billion. This bank was established in the year 1889. Back then, it was called Bank of Bermuda Ltd. It is the most profitable bank in Bermuda. It has acquired almost 47% of the total local banking market. It also charges a monthly fee for checking accounts.

When HSBC acquired this bank in 2004, it had 1050 employees; now, employees have reduced to 730. As of February 2017, the net profits of this bank of 2016 were $117 million. If we compare the figure with the net profits of 2015, we would see that the net profits have increased almost thrice. In addition, the bank also paid a handsome dividendDividendDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more of $280 million to its owners.

HSBC also sold a  private bankingPrivate BankingPrivate banking refers to a type of banking and financial service offered by certain banks only to high-net-worth individuals (HNWIs). Clients opting for this service are individually assigned a financial representative who personally takes care of their banking needs.read more operation to Butterfield, which reduced operating expenses by 18% from the last year’s operating expenses. HSBC has also contributed around $700,000 to the various social causes in Bermuda.

#3. Clarien Bank Limited:

Clarien Bank Limited is the third biggest bank in Bermuda. As per the last report, it has acquired total assets of around $1.1 billion. As per previous April 2017, Clarien Bank has made around $1.2 million of net profitsProfitsProfit refers to the earnings that an individual or business takes home after all the costs are paid. In economics, the term is associated with monetary gains. read more in 2016, more than twice the net profits of 2015. Clarien Bank could hit such targets due to the tremendous downfall of operating expensesOperating ExpensesOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit.read more and increasing new lending hugely.

What is strange is even if the net profits of 2016 were at an all-time high, the revenue Revenue Revenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions.read moreof 2016 was 3% less than the revenue of 2015 because the impaired loans have a large chunk (around 15%) of the total portfolio. Previously, it was named Capital G Bank Ltd. It amalgamated and changed its name on 7th January and 22nd April 2017. Clarien Bank charges a monthly fee for checking accounts like all other local banks.

#4. Bermuda Commercial Bank Ltd. (BCB):

Bermuda Commercial Bank Ltd. (BCB) is the fourth bank in Bermuda as per the size of the total assets. The total assets of Bermuda Commercial Bank Ltd. are more than $649 million as per the last report. It was established in 1969 as Bermuda Provident Bank Limited as per the act of Parliament. Later, in 1984, it changed its name to Bermuda Commercial Bank Ltd. The head-quarter of this bank is in Hamilton.

One of the four licensed banks in Bermuda has employed around 73 employees who take care of their varied customers. BCB offers various financial products and services ranging from savings bank accounts to fixed deposit accounts to e-banking services, drafts, and credit cards. The bank also offers investment products to its high-net-worth customers.

The bank charges a monthly fee for maintaining checking accountsChecking AccountsA checking account is a bank account that allows multiple deposits and withdrawals. Additionally, it provides superior liquidity.read more. It has also acquired two companies in Bermuda in 2011 – Charter Corporate Services Ltd. and Paragon Trust Ltd. As per the last report, BCB has generated well over $36 million in total income in 2016, which is more than double what BCB has earned in the previous year.

Thus, from the above details we get a clear idea about all the 4 banks that have been operating in the Bermuda region for a long time and providing exceptional level of service. Not only this, it is also to be noted that these banks have created a huge employment opportunity for finance professionals who have the required skill, knowledge, experience and interest to provide their best in the sector to help it grow and flourish.

We hope you liked this guide to what are Banks In Bermuda. We explain the structure of the banks and give details about the top 4 banks in the region. If you are looking forward to making a career in banking, then you can check out some of the awesome resources: –