Butterfield Bank's current share price makes it ripe for takeover — and it would be a "good fit" for one of the top Canadian banks.

That is the view of Jeremy Dyck, an investment adviser with LOM Securities (Bahamas) Ltd., who follows the 150-year-old local bank.

His comments come as rumours of a takeover swirl around the bank, which is preparing to release fourth-quarter and full-year financial results later this week.

Butterfield's share price dipped below $3 last week and was yesterday trading at $2.85 on the Bermuda Stock Exchange.

Mr. Dyck, who has been following the bank for several years, said in an interview: "I would speculate that at least a couple of the Canadian banks should be interested at those prices.

"Obviously they'd want to take a look under the hood and see what they're holding, particularly in the CMO (collateralised mortgage obligation) portfolio."

Other asset-backed securities, as well as Butterfield's loan book, derivative book, asset management and community banking operations would also come under close scrutiny, he added.

Mr. Dyck said Butterfield would probably fit best with one of the Canadian banks that have operations in the Caribbean, such as CIBC/FCIB, Scotiabank, or Royal Bank.

A Scotiabank spokeswoman said the company did not comment on market rumours or speculation, when asked whether the bank had been in talks with Butterfield or had any interest in taking it over.

Neither of the other two banks answered queries from this newspaper by press time.

Latin American or European banks might also be interested in Butterfield, probably to a lesser extent, Mr. Dyck said.

"Any potential suitor would need to be bigger and well-capitalised with operational synergies," Mr. Dyck said.

Butterfield has suffered from the US housing slump through its investments linked to US mortgages. It has already taken more than $200 million in write-downs on its portfolio.

Last year the bank raised $200 million in a preference share issue guaranteed by Government to ensure it had a sufficient capital cushion to withstand a severe economic downturn.

The bank was carrying unrealised losses of $319 million in its investment portfolio as of the third quarter of last year, according to Mr. Dyck's equity report on the bank, published last week.

Any worsening of the situation could mean the bank having to raise more capital, he added.