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What's in the Cards for Northern Trust's (NTRS) Q2 Earnings?

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Northern Trust Corporation’s (NTRS - Free Report) second-quarter 2021 results, scheduled for a Jul 21 release, will likely reflect year-over-year increases in revenues and earnings.

Northern Trust uses a lag effect to calculate its corporate custody and investment management fees, i.e. the computations are based on the prior-quarter end valuations. Since the performance of equity markets was impressive in the first quarter, the company is expected to have registered gains in custody, servicing and management fees during the to-be-reported quarter.

The bank provides majority of its asset-management services through the C&IS unit, which generates more than 50% of total revenues. An increase in revenues in this segment is anticipated to have offered some support to Northern Trust’s overall top line during the to-be-reported quarter. Per the Zacks Consensus Estimate, the C&I segment’s trust, investment and other servicing fees will likely be up 8.1% year over year to $612 million.

Here are the other factors that might have influenced the company’s quarterly performance:

Low Net Interest Income: Per the Fed’s latest data, the overall lending scenario was soft during the April-June period, with weak home equity, and commercial and industrial loans. Conversely, commercial real estate and consumer loan portfolios are anticipated to have offered support.

This, along with flattening of the yield curve and interest rates remaining at near-zero level, is expected to have dented the company’s net interest margin, thereby impacting its NII.

However, low deposit costs and higher average interest earning assets might have been offsetting factors.

The Zacks Consensus Estimate of $142.8 million for quarterly average interest earning assets calls for a 14.1% year-over-year improvement, while the NII is expected to be down 8.3% to $341 million.

Other Non-Interest Income: Given the low foreign-exchange (“FX”) trading volatility and decreased volumes during the June-end quarter, the company’s revenues from FX trading might have registered a decline. The Zacks Consensus Estimate of $72 million for foreign-exchange trading profits shows a 1.5% increase from the prior year quarter.

The Zacks Consensus Estimate for security commissions and trading income, and treasury management fees is pegged at $33.5 million and $11.5 million, respectively, suggesting marginal improvement on a year-over-year basis.

Controlled Expenses: Northern Trust’s expenses in the quarter are anticipated to have been under control, aided by its continued cost-saving initiatives.

What the Zacks Model Predicts

Northern Trust does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Northern Trust is -0.23%.

Zacks Rank: Northern Trust currently carries a Zacks Rank of 3.

Northern Trust has a decent earnings surprise history. It surpassed estimates in two of the trailing four quarters for as many misses, delivering an earnings surprise of 2.87%, on average.

Northern Trust Corporation Price and EPS Surprise

Northern Trust Corporation Price and EPS Surprise

Northern Trust Corporation price-eps-surprise | Northern Trust Corporation Quote

The Zacks Consensus Estimate for earnings for the second quarter is pegged at $1.71, which suggests a 17.1% increase from the year-ago reported number. The earnings estimate for the second quarter moved 1.2% south in the past seven days. The consensus estimate for sales of $1.58 billion indicates a 4.6% rise.

Banks Worth a Look

Here are a few bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

KeyCorp (KEY - Free Report) is scheduled to report second-quarter results on Jul 20. The company has an Earnings ESP of +0.26% and carries a Zacks Rank of 3, currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BankUnited, Inc. (BKU - Free Report) is set to release earnings numbers on Jul 22. The company holds a Zacks Rank of 3, at present, and has an Earnings ESP of +3.07%.

Fifth Third Bancorp (FITB - Free Report) is slated to report quarterly figures on Jul 22. The company has an Earnings ESP of +0.92% and carries a Zacks Rank of 3, currently.

In-Depth Zacks Research for the Tickers Above

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Fifth Third Bancorp (FITB) - free report >>

Northern Trust Corporation (NTRS) - free report >>

KeyCorp (KEY) - free report >>

BankUnited, Inc. (BKU) - free report >>