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Northern Trust (NTRS) Q2 Earnings Miss, Revenues Rise Y/Y

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Northern Trust Corporation’s (NTRS - Free Report) second-quarter 2022 earnings per share of $1.86 have missed the Zacks Consensus Estimate of $1.90. Nonetheless, the bottom line improved 8% year over year.

Higher revenues, aided by a rise in trust, investment and other servicing fees, as well as net interest income (“NII”), were the driving factors. Most credit metrics marked significant improvements. However, a rising expense base and weak capital ratios were headwinds.

Net income was $396.2 million, up 8% year over year.

Revenues Climb, Costs Shoot Up

On a fully-taxable-equivalent (“FTE”) basis, total revenues of $1.77 billion were up 12% year over year. The top line beat the Zacks Consensus Estimate of $1.73 billion.

NII was $469.8 million on a FTE basis in the second quarter, gaining 37% year over year mainly on a favorable balance sheet mix shift and net interest margin (“NIM”). NIM on a FTE basis was 1.35%, increasing 38 basis points from the prior-year quarter.

Trust, investment and other servicing fees summed at $1.14 billion, up 6% year over year. Other non-interest income fell 2% from the year-ago quarter to $166.6 million.

Non-interest expenses increased 9% year over year to $1.22 billion in the second quarter. The upswing stemmed from an elevation in all components except for outside service and occupancy expenses.

AUM and AUC Fall

As of Jun 30, 2022, Northern Trust’s total assets under custody (“AUC”) declined 11% sequentially to $10.68 trillion, while total assets under management (“AUM”) fell 12% to $1.30 trillion.

Credit Quality Improves

Credit metrics in the second quarter showed an improving trend. The total allowance for credit losses was $199.9 million, down 3% year over year. Total non-accrual assets plunged 15.8% to $89.8 million as of Jun 30, 2022. Net recoveries were $5.5 million compared with recoveries of $3.2 million in the year-ago quarter.

However, NTRS created provisions for credit losses of $4.5 million in the second quarter against reserve releases of $27 million in the prior-year quarter.

Capital Ratios Weak, Profitability Ratios Improve

Under the Standardized Approach, as of Jun 30, 2022, Common Equity Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 10.5%, 12.6% and 6.7% compared with 12%, 14.5% and 7.1%, respectively, in the prior-year quarter. All ratios exceeded regulatory requirements.

Return on average assets was 1.03%, up from 0.96% in the year-ago quarter. Also, the return on average common equity was 15.7% compared with the year-earlier quarter’s 13.7%.

Capital Deployment Activities

In the quarter, Northern Trust returned $148.3 million to its shareholders through share repurchases and dividends. NTRS repurchased $0.3 million of common stock under its share-repurchase program and declared cash dividends totaling $148 million to its common stockholders. NTRS also cleared cash dividends worth $4.7 million to its preferred stockholders in the second quarter.

Our Viewpoint

Northern Trust’s second-quarter performance was affected by a decline in AUC and AUM. Better revenues and improving credit quality will likely continue. Though escalating expenses might threaten NTRS’ profitability, higher fee income is anticipated to be a tailwind in the upcoming quarters.

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.

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

Performance of Other Banks

Citigroup Inc.’s (C - Free Report) second-quarter 2022 income from continuing operations per share of $2.30 have handily outpaced the Zacks Consensus Estimate of $1.67. However, the reported figure declined 19% from the prior-year quarter.

Citigroup witnessed growth in NII and non-interest revenues. However, declines in investment banking revenues, loans and deposits were spoilsports.

Truist Financial’s (TFC - Free Report) second-quarter 2022 adjusted earnings of $1.20 per share surpassed the Zacks Consensus Estimate of $1.17. However, TFC’s bottom line declined 22.6% from the prior-year quarter.

TFC’s results were aided by average loan growth and higher rates, which drove NII. However, lower non-interest income and a rise in provisions were the major headwinds.

Citizens Financial Group (CFG - Free Report) has reported second-quarter 2022 underlying earnings per share of $1.14, surpassing the Zacks Consensus Estimate of $1.02. However, the bottom line fell 22% from the year-ago quarter figure.

CFG’s results reflect NII growth on the rise in loan balances. Further, strong balance sheet growth, backed by an improving economy, was a tailwind. Citizens Financial closed the Investors Bancorp acquisition on Apr 6, 2022. However, a rise in expenses was a spoilsport.