THE Bank of N.T. Butterfield & Son Limited has submitted all the required regulatory applications to advance its US$1.8-billion acquisition of CIBC Caribbean Bank Limited which it expects to complete in the first half of 2027.

The Bermudan based bank announced in May that it was seeking to acquire CIBC Caribbean and expand its footprint to several new markets, including Jamaica. It has since received shareholder approval to issue new ordinary shares, submitted its regulatory applications and is preparing for a US$700 million debt issuance.

“Turning to the acquisition of CIBC Caribbean, the transaction remains on track with regulatory approvals, financing activities, and integration planning progressing as expected. During the quarter, we received shareholder approval for the acquisition and submitted the required regulatory applications,” said Bri Hidalgo, Butterfield chief risk officer, during its earnings call recently.

Butterfield’s planned acquisition requires it to receive non-objection to the change of beneficial owner for CIBC Caribbean. CIBC Caribbean currently operates in ten markets across the Caribbean, with Barbados and Bahamas being its two largest markets.

Apart from the regulatory approval, Butterfield is also gearing up to raise US$700 million in subordinated debt as part of the US$1.09 billion cash consideration component of the deal. Its latest earnings presentation indicated that it intends to execute the debt raise during the month of November.

“We’ve gotten a very warm welcome from all the governments and central banks. Spent a lot of time down there and spent a lot of time with our new CIBC Caribbean colleagues. It’s a great cultural fit, really good rapport, and it’s a really good bank,” noted Michael Collins, chairman and chief executive officer of Butterfield.

Although the deal is far from completion, Butterfield and CIBC Caribbean have already established dedicated integration teams to ensure a successful transition once the deal has been completed.

The Bermudan bank has also begun to further review the CIBC Caribbean’s balance sheet to understand the type of investments which make up its liquidity profile. This process is also aimed at balancing the exposure to sovereign risks while minimising credit risk in the investment portfolio.

“They do have some sovereign securities in both Bahamas and Barbados that we’re taking a look at in terms of either marketability or commitments that we’ve made to those governments. So, there will probably be some further work we’ll do before closing, to just familiarise ourselves,” stated Michael Schrum, Butterfield’s chief financial officer, in response to an analyst.

The pro-forma figures show the enlarged Butterfield having US$29 billion in assets, US$25 billion in deposits and US$400 million in annualised earnings.

Butterfield sees an opportunity to grow market share in some of the new territories over the long-term view of the business. This could be through residential mortgage-backed lending or collateral-backed lending in the retail space and growing merchant acquiring services in the corporate space. The aim is to optimise the retail bank specialty of Butterfield with the corporate specialty of CIBC Caribbean.

“The whole region’s kind of coming back from COVID. Tourism’s up. So, we’re pretty excited about the opportunities,” Collins added.

Despite the positive prospects by Butterfield’s management, its rating agencies have adjusted their stances on Butterfield’s credit rating based on the CIBC Caribbean deal.

Moody’s Ratings assigned a provisional Baa1 credit rating to Butterfield’s proposed subordinated debt offer and placed the offer on review for a downgrade. That follows Moody’s May announcement that it had placed Butterfield’s own A2 long-term credit rating on review for a downgrade based on the CIBC Caribbean deal.

The ratings agency now anticipates that the proposed debt offer would not be downgraded by more than two notches if the acquisition is closed. That could push the debt offer’s credit rating to Baa3, the lowest rung for an investment grade credit rating by Moody’s.

“We anticipate that the acquisition could result in up to a two-notch downgrade of Butterfield’s BCA. This is driven by the weakened pro forma financial profile stemming from both the cost of the acquisition as well as the revised blended macro profile score,” Moody’s noted in its October 28 update.

Kroll Bond Rating Agency revised the watch status for Butterfield’s unsecured and subordinated debt to watch downgrade in its September 22 review. S&P Global Ratings had already placed Butterfield on a negative outlook in May based on the announced deal.

Butterfield’s total net revenue for the third quarter (July to September) grew six per cent to US$162 million due to improved trust management fees and a reduction in interest expenses. However, higher operating expenses connected to the CIBC Caribbean deal resulted in consolidated net profit marginally declining from US$61.06 million to US$60.99 million. Despite this marginal dip, Butterfield’s revenue and core earnings per share beat analyst estimates.

For the overall nine months, Butterfield’s total net revenue was up six per cent to US$474.81 million while consolidated net profit increased one per cent to US$170.52 million. The bank was affected by higher staff costs, other operating expenses and costs associated with the CIBC Caribbean deal.

Butterfield’s total assets are up one per cent over the nine months to US$14.27 billion as its loan book stands at US$4.38 billion. Total liabilities were up two per cent to US$13.15 billion which includes deposits of US$12.90 billion. Total equity was down two per cent to US$1.12 billion due to unrealised losses on some of its investments.

Butterfield’s share price on the New York Stock Exchange remains up 13 per cent year-to-to-date at US$56.05 which translates to a market capitalisation of US$2.22 billion. Butterfield is set to pay a US$0.50 dividend totalling US$19.78 million on November 25 to shareholders on record as of November 10. Butterfield has paused its share buyback programme since May 2026.