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Northern Trust (NTRS) Signals 10% Fall in Q3 NII on High Costs

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Northern Trust Corporation (NTRS - Free Report) forecasts a major plunge in the company’s net interest income (NII) at Barclays Global Financial Services Conference, per a Reuters article.

Per management, NII is likely to fall 10% in third-quarter 2023. The recent forecast is double than its initial expectation of a 5% decline in NII.

Over the last few quarters, funding costs had increased considerably given the high interest rate environment, with customers shifting their investments to other higher-yielding assets. This had adversely impacted the company’s deposit base.

Given the tough macroeconomic backdrop, Northern Trust’s total deposits tumbled in the first half of 2023. Also, higher funding costs weighed on its net interest margin, which caused the metric to decrease over the same period.

Nonetheless, Jason Tyler, NTRS’ chief financial officer stated that deposits have generally stabilized in the third quarter of 2023.

Northern Trust is supported by its organic growth reflected by a rise in revenues and loan balances over the years. The uptrend continued for both metrics in the first half of 2023.

Further, robust pipelines in asset servicing and several new wins across both operating segments will drive organic growth and propel fee income in the upcoming period.

Northern Trust’s shares have lost 3.2% over the past three months against the industry’s growth of 0.8%.


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NTRS presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from Northern Trust, other finance firms like Bank of America Corporation (BAC - Free Report) and Citizens Financial Group, Inc. (CFG - Free Report) have mentioned their guidance and initiatives at Barclays Global Financial Services Conference.

At a time when performance of overall investment banking (IB) business is unimpressive, BAC’s chief financial officer, Alastair Borthwick, noted that IB fees for the sector are likely to be down 30-35% in third-quarter 2023 from the year-earlier quarter.

At the conference, while speaking about overall IB performance, Borthwick stated, “We'll do slightly better than that, but that still puts the investment banking fees, which are probably right around $1 billion mark.”

CFG stated underlined balance sheet optimization plans to strengthen its capital and liquidity position. Accordingly, CFG plans to reduce its non-core loan portfolio by $9.2 billion from $13.7 billion as of the second-quarter 2023 end.

Management seems in no rush to sell non-core portfolio and intends to avoid recording losses related to the sales. The reduction is likely to take place by 2025 end.

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