NTB
Bank of N.T. Butterfield & Son Ltd
Price:  
46.34 
USD
Volume:  
82,909
Bermuda | Banks

NTB WACC - Weighted Average Cost of Capital

The WACC of Bank of N.T. Butterfield & Son Ltd (NTB) is 6.5%.

The Cost of Equity of Bank of N.T. Butterfield & Son Ltd (NTB) is 6.65%.
The Cost of Debt of Bank of N.T. Butterfield & Son Ltd (NTB) is 5%.

RangeSelected
Cost of equity5.6% - 7.7%6.65%
Tax rate1.7% - 1.8%1.75%
Cost of debt5.0% - 5.0%5%
WACC5.5% - 7.4%6.5%
WACC

NTB WACC calculation

CategoryLowHigh
Long-term bond rate3.9%4.4%
Equity market risk premium4.6%5.6%
Adjusted beta0.370.5
Additional risk adjustments0.0%0.5%
Cost of equity5.6%7.7%
Tax rate1.7%1.8%
Debt/Equity ratio
0.10.1
Cost of debt5.0%5.0%
After-tax WACC5.5%7.4%
Selected WACC6.5%

NTB's CAPM model and how its cost of Equity is calculated

The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.

This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.

Here’s how we figure out the cost of equity for NTB:

cost_of_equity (6.65%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.37) + risk_adjustments (0.25%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.