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Northern Trust's (NTRS) Q2 Earnings Beat Estimates, NII Rises
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Northern Trust Corporation’s (NTRS - Free Report) second-quarter 2023 adjusted earnings per share (excluding severance-related charges and costs related to the write-off of an investment in a client capability) of $1.79 surpassed the Zacks Consensus Estimate. However, the bottom line declined 3.8% year over year.
Results have been aided by a rise in net interest income (NII), driven by higher rates. An improvement in credit quality acted was another positive during the second quarter. However, a rising expense base and lower fee income were headwinds.
Net income was $331.8 million, down 16.3% year over year.
Revenues Decline, Costs Rise
Quarterly total revenues (GAAP basis) of $1.76 billion were down 1% year over year. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $1.75 billion.
NII was $511.5 million in the quarter under review, gaining 11.5% year over year. The net interest margin was 1.53%, increasing from 1.31% in the prior-year quarter.
Trust, investment and other servicing fees totaled $1.1 billion, down 4.1% from the year-ago quarter. Other non-interest income was $149.3 million, down 10.4% from the prior-year quarter.
Non-interest expenses increased 8.9% to $1.33 billion in the reported quarter. The upswing stemmed mostly from an elevation in compensation as well as equipment and software expenses.
AUM and AUC Rise
As of Jun 30, 2023, Northern Trust’s total assets under custody (AUC) increased 5.6% year over year to $11.28 trillion. Also total assets under management (AUM) grew 4.8% to $1.37 trillion.
Credit Quality Improves
Total allowance for credit losses was $197.5 million, decreasing 1.2% year over year. NTRS released provisions for credit losses of $15.5 million in the second quarter against provisions of $4.5 million in the year-ago quarter.
Total non-accrual assets plunged 47.2% to $47.4 million as of Jun 30, 2023.
Capital Ratios Decent, Profitability Declines
Under Standardized Approach, as of Jun 30, 2023, Common Equity Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 11.3%, 14.4% and 7.4% compared with 10.5%, 12.6% and 6.7%, respectively, in the prior-year quarter.
Return on average assets was 0.91%, down from 1.03% in the year-ago quarter. Also, return on average common equity was 12.4% compared with the year-earlier quarter’s 15.7%.
Capital Deployment Activities
In the reported quarter, Northern Trust returned $257.1 million to shareholders through share repurchases and dividends.
Our Viewpoint
Northern Trust’s second-quarter performance was affected by a decline in fee income. Also, escalating expenses may threaten NTRS’ profitability in the upcoming quarters. Nonetheless, rising NII, growth in AUC and AUM are likely to support financials.
Northern Trust Corporation Price, Consensus and EPS Surprise
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 has outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC have benefited from higher NII and non-interest income. Improvements in capital and profitability ratios were other positives. However, higher provisions for credit losses and rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 have outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in the top line due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were bright spots.
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Northern Trust's (NTRS) Q2 Earnings Beat Estimates, NII Rises
Northern Trust Corporation’s (NTRS - Free Report) second-quarter 2023 adjusted earnings per share (excluding severance-related charges and costs related to the write-off of an investment in a client capability) of $1.79 surpassed the Zacks Consensus Estimate. However, the bottom line declined 3.8% year over year.
Results have been aided by a rise in net interest income (NII), driven by higher rates. An improvement in credit quality acted was another positive during the second quarter. However, a rising expense base and lower fee income were headwinds.
Net income was $331.8 million, down 16.3% year over year.
Revenues Decline, Costs Rise
Quarterly total revenues (GAAP basis) of $1.76 billion were down 1% year over year. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $1.75 billion.
NII was $511.5 million in the quarter under review, gaining 11.5% year over year. The net interest margin was 1.53%, increasing from 1.31% in the prior-year quarter.
Trust, investment and other servicing fees totaled $1.1 billion, down 4.1% from the year-ago quarter. Other non-interest income was $149.3 million, down 10.4% from the prior-year quarter.
Non-interest expenses increased 8.9% to $1.33 billion in the reported quarter. The upswing stemmed mostly from an elevation in compensation as well as equipment and software expenses.
AUM and AUC Rise
As of Jun 30, 2023, Northern Trust’s total assets under custody (AUC) increased 5.6% year over year to $11.28 trillion. Also total assets under management (AUM) grew 4.8% to $1.37 trillion.
Credit Quality Improves
Total allowance for credit losses was $197.5 million, decreasing 1.2% year over year. NTRS released provisions for credit losses of $15.5 million in the second quarter against provisions of $4.5 million in the year-ago quarter.
Total non-accrual assets plunged 47.2% to $47.4 million as of Jun 30, 2023.
Capital Ratios Decent, Profitability Declines
Under Standardized Approach, as of Jun 30, 2023, Common Equity Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 11.3%, 14.4% and 7.4% compared with 10.5%, 12.6% and 6.7%, respectively, in the prior-year quarter.
Return on average assets was 0.91%, down from 1.03% in the year-ago quarter. Also, return on average common equity was 12.4% compared with the year-earlier quarter’s 15.7%.
Capital Deployment Activities
In the reported quarter, Northern Trust returned $257.1 million to shareholders through share repurchases and dividends.
Our Viewpoint
Northern Trust’s second-quarter performance was affected by a decline in fee income. Also, escalating expenses may threaten NTRS’ profitability in the upcoming quarters. Nonetheless, rising NII, growth in AUC and AUM are likely to support financials.
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 Major Banks
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2023 earnings per share of $1.25 has outpaced the Zacks Consensus Estimate of $1.15. The figure improved 66.7% year over year.
Results of WFC have benefited from higher NII and non-interest income. Improvements in capital and profitability ratios were other positives. However, higher provisions for credit losses and rise in expenses were the undermining factors.
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 have outpaced the Zacks Consensus Estimate of $1.31.
In the second quarter, C witnessed a decline in the top line due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in Personal Banking and Wealth Management segments were bright spots.