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Northern Trust (NTRS) Q1 Earnings Beat Mark, Revenues Rise

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Northern Trust Corporation (NTRS - Free Report) delivered an earnings beat of 6.63% for first-quarter 2022. Earnings per share of $1.77 surpassed the Zacks Consensus Estimate of $1.66. Moreover, the bottom line improved 4% year over year.

Higher revenues, aided by a rise in fee income and net interest income (“NII”), were a driving factor. Most credit metrics also marked significant improvements. However, a rising expense base and weak capital ratios were headwinds.

Net income came in at $389.3 million, up 4% year over year.

Revenues Climb, Costs Shoot Up

On a fully-taxable-equivalent (“FTE”) basis, total revenues of $1.72 billion were up 9% year over year. The top line beat the Zacks Consensus Estimate of $1.69 billion.

The NII on an FTE basis in the first quarter, $387.7 million, gained 12% year over year, mainly on higher average earning assets and net interest margin (“NIM”).

NIM on FTE basis came in at 1.05%, increasing five basis points from the prior-year quarter’s level. This rise was driven by favorable balance-sheet volume and mix shift.

Non-interest income improved 8% from the year-ago quarter’s level to $1.34 billion. Trust, investment and other servicing fees summed $1.17 billion, up 10% year over year.

Non-interest expenses increased 8% year over year to $1.21 billion during the first quarter. This upswing stemmed from an elevation in all components.

AUM and AUC Rise

As of Mar 31, 2022, Northern Trust’s total asset under custody (“AUC”) climbed 4% year over year to $12 trillion, while total assets under management (“AUM”) increased 3% to $1.49 trillion.

Improved Credit Quality

Credit metrics during the March quarter showed an improving trend. Total allowance for credit losses was $189.9 million, down 18% year over year. Total non-accrual assets plunged 19.4% to $101 million as of Mar 31, 2022. Net recoveries were $3.2 million compared with recoveries of $0.9 million reported in the year-ago quarter.

However, NTRS created provisions for credit loss of $2 million in the first quarter against reserves of $30 million reported in the prior-year quarter.

Weak Capital Ratios & Mixed Profitability Ratios

Under the Advanced Approach, as of Mar 31, 2022, Common Equity Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio came in at 12.6%, 13.4% and 6.1% each compared with 13.2%, 14.3% and 6.4%, respectively, witnessed in the prior-year quarter. All ratios exceeded regulatory requirements.

Return on average assets was 0.97% down from 0.99% witnessed in the year-ago quarter.

Nonetheless, return on average common equity was 14.2% compared with the year-earlier quarter’s 13.7%.

Capital Deployment Activities

During the quarter, Northern Trust returned $181.6 million to its shareholders through share repurchases and dividends. NTRS repurchased $33.8 million of common stock under its share-repurchase program and declared cash dividends totaling $147.8 million to its common stockholders. NTRS also cleared cash dividends worth $16.2 million to its preferred stockholders during the current quarter.

Our Viewpoint

Northern Trust put up an impressive show during the March quarter. Growth in AUC and AUM, better revenues, and an improving credit quality will likely continue. 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect higher loan balance, provision benefits and declining expenses. However, declines in NII and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII, NIM and a rise in expenses were the key undermining factors.

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline, primarily due to a fall in fee income. Margin contraction and capital position deterioration played spoilsports for FITB.