For a lot of reasons, Bank of N.T. Butterfield & Son (or "Butterfield") (NYSE:NTB)
is an odd bank. It's the only publicly-traded pure-play on banking in
Bermuda and the Cayman Islands, it has uncommonly high market share, and
it operates with uncommonly low risk-weighted assets. It also has a
very healthy trust business and quite a bit of capital, not to mention
above-average asset sensitivity.
Perhaps odder still
is that this bank actually looks undervalued. Although I think it will
be a challenge for Butterfield to deliver meaningful loan growth, the
interest sensitivity and fee-generating businesses should generate
revenue growth and good expense leverage. While compliance, regulatory,
and oversight risks are real, even with an elevated discount rate, these
shares look potentially undervalued today, with a solid dividend kicker
as well.
Read more here:
Butterfield's Profitable Banking And Trust Operations Overshadowed By Regulatory Concerns
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