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Is an Earnings Beat in Store for Northern Trust (NTRS) in Q1?

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Northern Trust Corporation’s (NTRS - Free Report) first-quarter 2022 results are scheduled for an Apr 26 release before market opens. Although earnings are expected to decline from the year-ago reported figure, revenues are expected to grow.

In the last-reported quarter, NTRS’ earnings surpassed the Zacks Consensus Estimate on higher revenues, aided by a rise in fee income and net interest income (“NII”). Most credit metrics marked significant improvements while  net interest margin (“NIM”) shrank and the expense base witnessed a rise.

Northern Trust boasts of an impressive earnings surprise history. Its earnings surpassed estimates in all of the trailing four quarters, the surprise being 6.5%, 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

NTRS’ activities in the to-be-reported quarter were adequate to raise analysts’ optimism. As a result, the Zacks Consensus Estimate for first-quarter earnings of $1.66 has moved 1.2% upward in the past month. However, the figure indicates a 2.4% fall from the year-ago quarter’s reported figure. Nonetheless, the consensus estimate for revenues is pegged at $1.69 billion, suggesting growth of 6.7% from the year-ago quarter’s reported figure.

Here are other factors that might have impacted NTRS’s quarterly performance:

NII: The ongoing economic expansion is expected to have supported the lending environment in the quarter under review. Per the Fed’s latest data, loan demand, particularly commercial and industrial loans, consumer loans and real-estate loans improved in first-quarter 2022 compared with fourth-quarter end. Amid this, NTRS is likely to have witnessed decent loan growth in the March quarter.

A strong loans pipeline is expected to have driven organic growth across both corporate and institutional services (C&IS), and wealth management segments during the quarter. Hence, higher level of loans will likely boost average interest-earning assets. The Zacks Consensus Estimate of $150.8 million for average interest-earning assets for the quarter indicates a 1.3% improvement from the last-reported figure

In March, the Federal Reserve hiked short-term interest rates. The positive impact of the rising rates might reflect gradually in the subsequent quarters.

Nonetheless, improvement in the lending scenario is expected to have supported NIM and NII. This, along with higher average interest-earning assets, is likely to have boost NTRS’s NII. The Zacks Consensus Estimate for NII is expected to have risen 1.7% to $367 million, sequentially.

Fee Income: Northern Trust uses a lag effect to calculate its corporate custody and investment management fees, i.e., computations are based on the prior-quarter-end valuations. The performance of equity markets was volatile in the fourth quarter. Hence a spike in equity trading volumes and higher client activities might have registered gains for NTRS in custody, servicing and management fees during the first quarter.

NTRS provides the 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.

The Zacks Consensus Estimate for the C&I segment’s trust, investment and other servicing fees stands at 1.1% growth from the prior quarter’s reported figure to $632 million.

The Zacks Consensus Estimate for security commissions and trading income, and treasury management fees, pegged at $36.8 million and $10.9 million, respectively, is likely to have increased 2.5% and 2.6%, sequentially.

Expenses: NTRS’ investments in digital initiatives and technology might have kept costs elevated during the quarter. These investments might aid the company over the long term, but the rising current expense level might have curbed bottom-line expansion in the first quarter. Costs might have also increased due to inflation and competitive labor markets.

What Does the Zacks Model Say?

The proven Zacks model predicts an earnings beat for Northern Trust this time around. This is because NTRS has 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: Northern Trust has an Earnings ESP of +0.06%.

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

Other Stocks That Warrant a Look

Associated Bancorp (ASB - Free Report) and Independent Bank Corporation (IBCP - Free Report) are a couple of stocks from the banking space that you might want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for ASB is +0.81% and the company carries a Zacks Rank #2 (Buy) at present. ASB is slated to report first-quarter 2022 results on Apr 21. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for ASB’s first-quarter earnings has remained flat over the past month.

IBCP is scheduled to release first-quarter results on Apr 26. IBCP currently has a Zacks Rank #2 and an Earnings ESP of +10%.

The Zacks Consensus Estimate for IBCP’s first-quarter earnings has remained flat over the past 30 days.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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