Butterfield Mortgages Ltd is the UK property finance subsidiary of the Butterfield Group, the 150 year-old Caribbean bank, which is also listed on the New York Stock Exchange. Its CEO, Alpa Bhakta, is a phenomenon. She entered the financial sector aged 16 – and has been there, seen it and done it; and done it with verve and passion. Today, her core market is mortgage lending to High Net Worth clients (HNWs) buying residential property in London and the prime home counties. Such is the demand, Alpa has to keep hiring;and “we are picky because we need skills and personality. Everything we do is about relationships”.
“In 1988, the Holborn Circus branch of NatWest Bank employed around 120 people. It was a different era. In today’s branches you are lucky to meet even one bank employee”.
Alpa was 16 at the time and, against the wishes of a strict Indian family, she took her first step into the workforce. Alpa’s father did not want her to leave school. He wanted her to be an accountant. But Alpa says “yes, I missed out on the experience of going to college as a young person, but starting work at NatWest aged 16 was the best thing I ever did. I learned the nuts and bolts of financing”.
“Starting work at NatWest aged 16 was the best thing I ever did”
Simultaneously with joining NatWest, Alpa enrolled to study – two nights per week for two years – for the BTEC National in Business and Finance. This covered everything from accounts through marketing to dealing with people.
At NatWest, Alpa started at the bottom in “the machine room”, processing cheques and the like. From there she moved to looking after clients’ accounts and troubleshooting – followed by a spell at NatWest’s Premier Centre, where customers needed to be earning £50,000 a year to be included.
Alpa stayed nine years at NatWest Holborn Circus, which even then was unusual. “But there was no scope to move functions”.
“Life was simple. Client relationships were built on mutual trust and no one had heard of KYC”
Like all of her jobs, they have tended to come to Alpa rather than the other way around and, in 1996, through a contact and word of mouth, she joined Crédit Agricole Indosuez (CAI) and its Private Banking Division as an assistant to one of their managers. The team specialised in East Africa and, with her origins, it was assumed that there would be a cultural fit with the share dealing client base. “Life was simple. Client relationships were built on mutual trust and no one had heard of KYC” (i.e. know-your-customer). The term is used to refer to bank and anti-money laundering regulations which govern these activities; it is the process of a business verifying the identity of its clients.
After 12 months with CAI her manager unexpectedly resigned and Alpa was left to run all client relationships which her predecessor had been doing for more than 10 years.
Alpa managed a difficult situation very well. However, the Private Banking division of CAI was in a state of flux in terms of its staff – and there were question marks about its stability. These were all sources of concern – compounded by the fact that Alpa had recently married and bought a house. Fortunately, she was presented with – and accepted – an opportunity to join Generale Bank in 1999 prior to it being acquired by Fortis Bank that same year. This was also hot on the heels of Fortis acquiring MeesPierson (and its mortgage book) in 1997 from ABN AMRO in what increasing looked like an international game of banking Pac-Man.
After almost a decade at NatWest, Alpa had four employers in so many years. But Fortis was growing fast and was very keen to develop the private bank. “We were based in Appold Street and, at the time of the takeover, there were only two ladies in the mortgage department and three mortgages on the books”. But it rose exponentially with Fortis. “We started helping Belgian clients buy property in London and I morphed into a relationship manager”. Business was good and growing. Alpa’s clients were HNWs who were buying UK assets with multi-currencies. “Many were traders – and it was an exciting product”.
“At that time – and now – I meet every client face-to-face. Everything we do is about relationships”. Similarly, “my ethos is to understand and deliver – and, if you can’t, then work with them until you can find a solution”.
“I meet every client face-to-face”
In fact, Alpa had learned and developed the foundations of this tenet very early at NatWest, where she says the training was first class. But it was refined at Fortis by her first acknowledged mentor – an ex-school teacher in her 50s, who had joined Banking as a secretary. “But she was much, much more than that. She was also used to children and open to nurturing and training. Brilliant”.
Eighteen months in to her Fortis tenure, the first of her two children was born (a girl now aged 17). A year and a day later, number two (a boy now aged 16) was born. Here, again, the presence of her mentor was a significant support in a sharply male-dominated work force. “I was the only person in the department with young children”.
Alpa was similarly fortunate on the home front. “I had my in-laws living with me; and my parents around the corner. Without them it would have been impossible to work and have a family”.
“As for my business day, I worked flat out from 10am through 4pm with half an hour for lunch; and I got more done than in a full day”.
The global financial crisis
But “it all changed big time in 2007-08. Lehman Brothers went bust in September 2008 and there was nowhere to hide”. Yet “we had just three repossessions in 12 years and on only one did we lose money”.
Nonetheless, “the loan book came under stress. It was assumed that there would be a 40% fall in property values. As always, though, we met every single client face-to-face”.
In 2007, Fortis was the 20th largest business in the World by revenue but, like many, it encountered severe problems in the Global Financial Crisis (GFC), which began in 2008. To be fair, much of this stress arose because it had joined forces with RBS and Santander in a consortium bid for ABN AMRO. Ultimately, its fate was sealed in 2009 when it had to be bailed out by the Benelux Governments – and, very quickly, its Belgian banking operations were sold to BNP Paribas “and my unit became BNP Paribas Fortis”. By this time my manager had retired and I was now Director of Property Finance.
“My ethos is to understand and deliver – and, if you can’t, then work with them until you can find a solution”
At first flush, with a new employer, it was positive. “Initially, though, they had not appreciated what our little unit did until we were discovered by the Personal Finance Department. Okay, they knew very little about UK mortgages – but were keen to have a mortgage presence here in the HNW space to complement their HNW mortgage offering in Europe. And, following a thorough due diligence process, they took us under their wing and we became their next success story”.
At this time, Alpa’s mentor number two emerged. He was one of the Directors in the Personal Finance Department in France – a Yorkshireman who had lived in France for a long time. “He was a black and white sort of guy and very down to earth. He also knew how to deal with the French and French bureaucracy. And, he taught me how to operate in a male-dominated board room. He knew a lot and brought out the best in me”.
“We were writing a lot of business too and were on a growth trajectory but BNP Paribas had its own issues in Europe and struggled with the concept – and practice – of taking capital out of France and investing it in the UK. Ultimately, BNP took the decisions to stop UK mortgages overnight but they kept the mortgage book – which meant we had to wind it down”.
The move to Butterfield
“I was made redundant in August 2011. Once more, though, through keeping my ear to the ground, an opportunity emerged almost immediately at Butterfield – and I joined the Butterfield Private Bank in October 2011”. Alpa was charged with developing the UK Property Finance Unit at the Private Bank in the UK. Unsurprisingly, this was food and drink to her and, following her successful turnaround of this service area, Alpa was promoted to a Head of European Lending across the private bank in London and the bank in Guernsey with a remit to align the two service offerings and grow market share.
“In December, the Group’s Executive Committee decided to amalgamate the Guernsey and London operations and my job got bigger. I quickly discovered, however, that each jurisdiction was doing its own thing – and there was no consistency in the product offering. It was thus important to align both teams quickly and ensure that they were following a common strategy. This was a lot more difficult than I imagined and, at first, I was spending two or three days per month in Guernsey”.
In 2011, the Butterfield Group stopped commercial lending in the UK through the private bank. At the same time, though, the residential loans business was growing fast with its catchment of essentially HNWs and Ultra HNWs taking out with mortgages through the private bank. “The customers liked it but it was very difficult to establish a private banking relationship. We had a great loan book but the private bank struggled”.
Moving away from private banking
In February 2016, the strategic decision was taken to close the private bank but continue with mortgages as a stand-alone business, which was to be known as Butterfield Mortgages Ltd (BML). Thus, began an orderly wind down of its deposit taking and investment management businesses in the UK, which was known as Butterfield Private Bank. The Group intended to utilise the capital which was deployed in the UK operations to support the development of other businesses within the Butterfield Group.
Butterfield Chairman and CEO, Michael Collins said “Butterfield Mortgages Limited has retained a highly experienced team of residential mortgage specialists with strong connections in the London real estate market, developed over many years. As part of our global wealth management service, we will continue to assist high net worth families, based in the UK and internationally, with the acquisition of unique properties in the most desirable neighbourhoods in central London. From a balance sheet perspective, BML will provide our highly liquid Guernsey bank with low-risk, floating rate Sterling loans to invest its Sterling deposits”.
Butterfield is specialist provider of international financial services. The Butterfield Group offers a full range of community banking services in Bermuda, and the Cayman Islands, encompassing retail and corporate banking and treasury activities. Butterfield also provides services to corporate and institutional clients from offices in Bermuda, The Bahamas, the Cayman Islands and Guernsey, which include asset management and trust services.
Butterfield is publicly traded on the New York Stock Exchange (NTB:US) following a successful IPO in September 2016. Its shares also continue to be listed on the Bermuda Stock Exchange (NTB.BH).
Butterfield Bank enjoys a record 2017
KEY FINANCIAL METRICS
- Market capitalisation: $US 2.57 billion on 13 March 2018
- In the past 12 months, the shares have returned 47% to shareholders (data are from Bloomberg); and since the IPO the share price has doubled to $47.00
- Net income for the year was 32% higher at $153.3 million with net income per diluted common share comfortably more than doubling to $2.76.
- Core net income for the year increased 15% to $158.9 million and 16% on a per share basis to $2.86.
- Total assets of the Bank were $10.8 billion at 31 December 2017, down $0.3 billion from 2016.
Bank of N T Butterfield & Son Ltd