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Northern Trust (NTRS) Q4 Earnings Surpass, Revenues Rise

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Northern Trust Corporation (NTRS - Free Report) delivered a positive earnings surprise of 4.95% for fourth-quarter 2021. Earnings per share of $1.91 surpassed the Zacks Consensus Estimate of $1.82. Moreover, the bottom line jumped 70% year over year. Results are adjusted for non-recurring items.

Higher revenues, aided by a rise in fee income and net interest income (NII), were a driving factor. Moreover, most credit metrics marked significant improvements. However, net interest margin (NIM) shrank and expense base witnessed a rise.

Net income came in at $406.4 million, up 69% year over year.

For 2021, net income was $1.54 billion or $7.14 per share compared with the prior year’s $1.21 billion or $5.46. The Zacks Consensus Estimate was pegged at $7.03.

Revenues Climb, Costs Shoot Up

On a fully-taxable-equivalent basis, total revenues of $1.67 billion were up 9% year over year. The top line beat the Zacks Consensus Estimate of $1.64 billion.

In 2021, total revenues were up 6% from the prior-year level to $6.46 billion. The top line beat the Zacks Consensus Estimate of $6.44 billion.

The NII of $370.6 million in the fourth quarter gained 7% year over year, mainly on higher average earning assets to some extent.

NIM came in at 0.99%, declining 6 basis points from the prior-year quarter’s level. This decrease chiefly reflects lower average interest rates, partially offset by a favorable balance-sheet volume and mix shift.

Non-interest income improved 10% from the year-ago quarter’s level to $1.31 billion. Trust, investment and other servicing fees summed $1.11 billion, up 8% year over year.

Non-interest expenses inched up 2% year over year to $1.17 billion during the fourth quarter. This upswing chiefly stemmed from an elevation in all components other than occupancy and compensation expense.

AUM and AUC Rise

As of Dec 31, 2021, Northern Trust’s total AUC climbed 12% year over year to $12.6 trillion while total AUM increased 14% to $1.61 trillion.

Credit Quality: A Mixed Bag

Credit metrics during the December quarter showed a mixed trend. NTRS released credit loss reserves of $11.5 million in the fourth quarter against provisions of $2.5 million reported in the prior-year quarter. Total allowance for credit losses was $184.7 million, down 29% year over year. Total non-accrual assets fell 5.4% to $125.3 million as of Sep 30, 2021.

However, net charge-offs were $1.1 million compared with the net recoveries of $5.5 million reported in the year-ago quarter.

Mixed Capital Position

Under the Advanced Approach, as of Dec 31, 2021, Common Equity Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio came in at 13.3%, 15.4% and 6.9% each compared with 13.4%, 15.9% and 7.6%, respectively, witnessed in the prior-year quarter. All ratios exceeded regulatory requirements.
Return on average common equity was 14.5% compared with the year-earlier quarter’s 8.8%. Nonetheless, return on average assets was 1% compared with 0.67% witnessed in the year-ago quarter.

Capital-Deployment Activities

During the quarter, Northern Trust returned $148.6 million to its shareholders through share repurchases and dividends. NTRS repurchased $1.8 million of common stock under its share-repurchase program and declared cash dividends totaling $146.8 million to its common stockholders. NTRS also cleared cash dividends worth $4.7 million to its preferred stockholders during the current quarter.

Our Viewpoint

Northern Trust put up a decent show during the December quarter. Growth in assets under custody and management, better revenues and an improving credit quality will likely continue. However, depressed margin is a headwind. Though escalating expenses might pose a threat to NTRS’ profitability, higher fee income is anticipated to act as a tailwind.

Northern Trust Corporation Price, Consensus and EPS Surprise

Northern Trust Corporation Price, Consensus and EPS Surprise

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

Currently, Northern Trust carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

First Republic Bank’s (FRC - Free Report) fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by an increase in net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp (USB - Free Report) reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance and a strong capital position were encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.

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