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Shares of Northern Trust Corporation (NTRS - Analyst Report) have recorded a year-to-date return of 13.3%. Impressive organic growth, strong capital deployment activities and continuous improvement in credit quality were the driving force behind this growth story. Hence, keeping its shares in your portfolio will not be a bad idea.

However, we are not so confident that these positive factors will translate in to further price appreciation going forward due to considerable pressure on its bottom line owing to the sluggish economic recovery and stringent regulatory requirements. Consequently, adding more shares of Northern Trust to your portfolio may not be a good idea.

Why This Stance?

Northern Trust’s third-quarter 2013 earnings per share outpaced the Zacks Consensus Estimate. Results reflected top-line growth, lower provision for credit losses and a strong capital position. However, rise in operating expenses and a decline in net interest income were matters of concern.

Northern Trust’s capital deployment activities reflect its efforts towards enhancing shareholders’ value. Apart from the regular payment of a quarterly cash dividend, the company has an effective share repurchase program in place.

However, low short-term interest rates along with persistent narrow spreads at the short end of the yield curve continue to negatively impact net interest income and money market mutual fund fees. Moreover, a substantial exposure in global market, poses a risk to the company’s earnings amid the changing scenario in financial markets.

The company has seen a mixed track record when it comes to estimate revisions and the Zacks Consensus Estimate has not been in trend either. As a result, the company currently carries a Zacks Rank #3 (Hold). Over the last 30 days, the Zacks Consensus Estimate for 2013 declined 0.3% to $3.01 per share, while for 2014 it remained stable at $3.43 per share.

Other Stocks to Consider

If you are interested in the banking sector, you may consider a few better-ranked stocks like Fifth Third Bancorp (FITB - Analyst Report), KeyCorp. (KEY - Analyst Report) and Huntington Bancshares Incorporated (HBAN - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).

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