KBRA Affirms Ratings for The Bank of N.T. Butterfield & Son Limited
11 Jul 2025 | New York
KBRA affirms the senior unsecured debt and deposit ratings of A+, the subordinated debt rating of A, and the short-term debt and deposit ratings of K1 for Hamilton, Bermuda-based The Bank of N.T. Butterfield & Son Limited (NYSE: NTB or “the bank”). The Outlook for all long-term ratings is Stable.
Key Credit Considerations
The ratings continue to be anchored by the bank’s strong financial profile, characterized by a highly liquid balance sheet, low RWA density, historically modest cost of funds, diversified mix of fee businesses, and robust risk-adjusted equity capitalization (e.g., CET1 ratio of 25.2% at 1Q25). The well experienced management team, which has delivered consistent financial results for an extended period, further reinforces the earnings.
Credit risk remains limited compared to peers. Cash and short-term investments perennially aggregate about 25% of total assets while the total investment book, which consists almost exclusively of U.S. agency RMBS, has been consistently managed in the range of 40% of total assets.
The strong earnings performance remains tied to the diversified non-interest revenue base (40% of total revenues in 1Q25), low cost of total cost of deposits (1.60% at 1Q25), and disciplined expense management. The bank does not rely on non-deposit funds.
Rating Sensitivities
An upward trajectory for the ratings is unlikely, barring an exogenous event. Rating pressure would most likely emanate from material, sustained weakening of profitability from lower fee income contribution, or unanticipated credit deterioration within the bank’s residential loan portfolio, which includes sizeable single name exposures.
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