Butterfield Bank has been assigned senior unsecured debt and deposit ratings of A+, a subordinated debt rating of A by Kroll Bond Rating Agency.

Butterfield also received a short-term debt and deposit rating of K1. The outlook for all long-term ratings is stable.

KBRA said Butterfield’s ratings are underpinned by its strong financial profile, “characterised by a liquid and high-quality balance sheet, low cost of funds, and highly diversified revenue stream”.

The rating agency said that about 60 per cent of Butterfield’s total assets are either in the form of cash and short-term investments or highly rated investment securities, backed by the US government.

KBRA added: “Deposits, along with equity capital, almost fully fund assets (96 per cent); the deposit base, while lumpy and periodically prone to large outflows connected to business conditions in and outside of Bermuda, is low cost (0.38 per cent at 1Q 2019), and generally insensitive to interest rate movements.

“KBRA views favourably the magnitude of on-balance sheet asset liquidity in the event the sensitivity or volatility of the deposit base were to change.

“Fee income continues to account for about one-third of total revenues, providing NTB with substantial earnings diversity and performance differentiation (compared to the KBRA rated universe).

“Fee revenues are broad-based and largely uncorrelated to the loan and investment portfolios, which KBRA views positively.”

The rating agency added that it acknowledges that Butterfield operates in smaller, more economically concentrated markets without central bank existence and that it has sometimes been the subject of governmental inquiries as a result of its presence as an offshore financial intermediary domiciled or otherwise doing business in very low tax jurisdictions.

“The revenue diversity, in KBRA’s assessment, counters some of the economic and geographical limitations,” KBRA said. “In addition, KBRA views the bank’s policies and practices connected to the various forms of operational risk as robust.”