Home-grown Bank of Butterfield has outstripped global giant HSBC to become Bermuda’s biggest bank.

Butterfield was listed as having assets of $11.1 billion last year, compared to $8.7 billion for HSBC Bermuda, overtaking its rival by a sizeable margin.

A KPMG report into the state of the island’s banking industry said: “The change in position arose as Butterfield completed their acquisition of HSBC’s private banking operations in April 2016.”

But the banking sector as a whole in Bermuda shrunk by around $1.49 billion last year, a 6 per cent drop.

Clarien Bank had more than $1.1 billion in assets in the same period, while Bermuda Commercial Bank’s assets totalled a little over $649 million.

Net profits across the industry went up by $26 million, some 15 per cent compared to 2015.

The details were revealed in the latest Bermuda Banking survey carried out for KPMG’s Insights magazine.

Craig Bridgewater, head of banking at KPMG in Bermuda, said: “Six per cent is not a big number and what’s happened is there have been some movements in the industry.

“HSBC sold its private banking to Butterfield and Butterfield is restructuring its business.”

He added: “From time to time, customers may move funds around in the nature of their business — large reinsurance claims could see funds leave banks.”

Mr Bridgewater said that since the Insights survey was first produced six years ago, regulation of the sector had increased.

He said that the impact of stricter regulation had been a major topic in the Insights round table featuring the heads of the four island banks.

“Customer experience remains of paramount importance and investment in technology enablement has the potential to benefit the business, employees and customers.”

According to the survey, despite the drop in assets the banking sector remained “stable.”

The cost-to-income ratio, a key performance indicator for the productivity and efficiency of banks, has remained in line with the five-year average.

Mr Bridgewater said: “Clearly, there is the regulatory environment and that continuously becomes more of a challenge.

“I don’t see any weakness in there so far — they have been able to absorb these challenges.”

He added: “It has been an eventful year for Bermuda’s banking sector. Butterfield listed on the New York Stock Exchange, HSBC sold their private banking operations, BCB moved into its new premises and Clarien received a significant capital injection.”

HSBC reported $117 million in profits for 2016, up $34 million, or 34 per cent, compared to the previous year.

Butterfield made $116 million profits over the same period up $37.8 million, or 48 per cent, compared to 2015.

Clarien Bank ended the year with $1.2 million in net profits, more than double the 2015 figure, while BCB had a net loss $6.63 million, put down to poor performance of investments, as well as currency depreciations as result of the fall in sterling after the UK voted to leave the European Union.