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Northern Trust (NTRS) Down on Q4 Earnings & Revenue Miss
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Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 have missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Shares of NTRS fell almost 4% in pre-market trading on lower-than-expected results. A full-day trading session will depict a clearer picture.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income (NII) driven by higher rates acted as a tailwind.
After considering non-recurring items, net income was $155.7 million, down 62% year over year.
In 2022, earnings were $6.14 per share, down 14% from the prior year. Net income also declined 14% to $1.34 billion.
Revenues Down, Costs Rise
Quarterly total revenues of $1.51 billion were down 9% year over year. The top line missed the Zacks Consensus Estimate of $1.76 billion.
In 2022, total revenues grew 5% to $6.76 billion. The top line lagged the consensus estimate of $7.01 billion.
NII was $534.5 million in the fourth quarter, gaining 48% year over year, mainly due to a higher net interest margin (NIM). NIM was 1.58%, increasing from 0.96% in the prior-year quarter.
Trust, investment and other servicing fees totaled $1.04 billion, down 6%. Other non-interest loss was $57.6 million against other non-interest income of $195.7 million in the year-ago quarter.
Non-interest expenses increased 13% to $1.32 billion in the fourth quarter. The upswing stemmed from an elevation in all components except employee benefits costs.
AUM and AUC Fall
As of Dec 31, 2022, Northern Trust’s total assets under custody (AUC) declined 16% year over year to $10.6 trillion, while total assets under management (AUM) fell 22% to $1.25 trillion.
Credit Quality Deteriorates
The total allowance for credit losses was $200.9 million, increasing 9% year over year.
NTRS created provisions for credit losses of $5 million in the fourth quarter against reserve releases of $11.5 million in the prior-year quarter.
Total non-accrual assets plunged 62% to $76.4 million as of Dec 31, 2022.
Capital & Profitability Ratios Weak
Under the Standardized Approach, as of Dec 31, 2022, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 10.8%, 13.9% and 7.1% compared with 11.9%, 12.9% and 6.9%, respectively, in the prior-year quarter.
Return on average assets was 0.42%, down from 1% in the year-ago quarter. Also, the return on average common equity was 5.9% compared with the year-earlier quarter’s 14.5%.
Capital Deployment Activities
In the quarter, Northern Trust returned $158.9 million to its shareholders through share repurchases and dividends.
Our Viewpoint
Northern Trust’s fourth-quarter performance was affected by a decline in AUC and AUM. Better revenues on rising NII will continue. However, escalating expenses and any decline in fee income might threaten NTRS’ profitability in the upcoming quarters.
Northern Trust Corporation Price, Consensus and EPS Surprise
First Republic Bank’s fourth-quarter 2022 earnings per share of $1.88 surpassed the Zacks Consensus Estimate of $1.82. However, the bottom line declined 6.9% from the year-ago quarter.
Results have been supported by a rise in net interest income (NII) and non-interest income. FRC’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
Wells Fargo’s (WFC - Free Report) fourth-quarter 2022 earnings per share of 67 cents outpaced the Zacks Consensus Estimate of 63 cents. Results included several non-recurring items like the $3.3 billion or 70 cents per share of operating losses related to “litigation, regulatory, and customer remediation matters.”
Results benefited from higher NII, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.
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Northern Trust (NTRS) Down on Q4 Earnings & Revenue Miss
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 have missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Shares of NTRS fell almost 4% in pre-market trading on lower-than-expected results. A full-day trading session will depict a clearer picture.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income (NII) driven by higher rates acted as a tailwind.
After considering non-recurring items, net income was $155.7 million, down 62% year over year.
In 2022, earnings were $6.14 per share, down 14% from the prior year. Net income also declined 14% to $1.34 billion.
Revenues Down, Costs Rise
Quarterly total revenues of $1.51 billion were down 9% year over year. The top line missed the Zacks Consensus Estimate of $1.76 billion.
In 2022, total revenues grew 5% to $6.76 billion. The top line lagged the consensus estimate of $7.01 billion.
NII was $534.5 million in the fourth quarter, gaining 48% year over year, mainly due to a higher net interest margin (NIM). NIM was 1.58%, increasing from 0.96% in the prior-year quarter.
Trust, investment and other servicing fees totaled $1.04 billion, down 6%. Other non-interest loss was $57.6 million against other non-interest income of $195.7 million in the year-ago quarter.
Non-interest expenses increased 13% to $1.32 billion in the fourth quarter. The upswing stemmed from an elevation in all components except employee benefits costs.
AUM and AUC Fall
As of Dec 31, 2022, Northern Trust’s total assets under custody (AUC) declined 16% year over year to $10.6 trillion, while total assets under management (AUM) fell 22% to $1.25 trillion.
Credit Quality Deteriorates
The total allowance for credit losses was $200.9 million, increasing 9% year over year.
NTRS created provisions for credit losses of $5 million in the fourth quarter against reserve releases of $11.5 million in the prior-year quarter.
Total non-accrual assets plunged 62% to $76.4 million as of Dec 31, 2022.
Capital & Profitability Ratios Weak
Under the Standardized Approach, as of Dec 31, 2022, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 10.8%, 13.9% and 7.1% compared with 11.9%, 12.9% and 6.9%, respectively, in the prior-year quarter.
Return on average assets was 0.42%, down from 1% in the year-ago quarter. Also, the return on average common equity was 5.9% compared with the year-earlier quarter’s 14.5%.
Capital Deployment Activities
In the quarter, Northern Trust returned $158.9 million to its shareholders through share repurchases and dividends.
Our Viewpoint
Northern Trust’s fourth-quarter performance was affected by a decline in AUC and AUM. Better revenues on rising NII will continue. However, escalating expenses and any decline in fee income might threaten NTRS’ profitability in the upcoming quarters.
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 Republic Bank’s fourth-quarter 2022 earnings per share of $1.88 surpassed the Zacks Consensus Estimate of $1.82. However, the bottom line declined 6.9% from the year-ago quarter.
Results have been supported by a rise in net interest income (NII) and non-interest income. FRC’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
Wells Fargo’s (WFC - Free Report) fourth-quarter 2022 earnings per share of 67 cents outpaced the Zacks Consensus Estimate of 63 cents. Results included several non-recurring items like the $3.3 billion or 70 cents per share of operating losses related to “litigation, regulatory, and customer remediation matters.”
Results benefited from higher NII, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.