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Riding on higher revenues, Northern Trust Corporation (NTRS - Free Report) reported a positive earnings surprise of 1.9% in first-quarter 2017. Earnings per share came in at $1.09, beating the Zacks Consensus Estimate of $1.07. Further, the reported figure compared favorably with $1.03 recorded in the year-ago quarter.
Better-than-expected results were stemmed by top-line growth and credit provisions. In addition, the quarter witnessed a rise in assets under custody as well assets under management. However, escalating operating expenses were a concern.
Net income came in at $276.1 million, up 13% from the prior-year quarter.
Top Line Grows, Costs Escalate
Total revenue of $1.29 billion surpassed the Zacks Consensus Estimate of $1.28 billion. Moreover, the reported figure was up 8% year over year.
On a fully taxable equivalent basis, net interest income of $362.4 million was up 15% year over year. This was driven by increased levels of average earning assets and higher net interest margin.
Net interest margin (NIM) was 1.35%, up 14 basis points from the prior-year quarter. The increase chiefly reflected higher short-term interest rates and reduced premium amortization.
Non-interest income rose 6% from the year-ago quarter to $930.9 million. Rise in trust, investment and other servicing fees, along with rise in security commissions and trading income, and other operating income were the primary reasons for this increase. These positives were partially offset by reduced foreign exchange trading income and lower treasury management fees.
Non-interest expenses were up 8% year over year to $894.5 million in the quarter. The rise was mainly driven by an elevation in mostly all components of expenses.
Improvement in Assets Under Management and Custody
As of Mar 31, 2017, Northern Trust’s total assets under custody increased 14% year over year to $7.11 trillion, while total assets under management rose 11% to $1.0 trillion.
Credit Quality: A Mixed Bag
Total allowance for credit losses came in at $189 million, down 19% year over year. Net charge-offs were $2 million, down 25.9% from the year-ago quarter figure. Also, credit provision was $1.0 million in the quarter compared with provision of $2.0 million in the prior-year quarter.
However, non-performing assets increased 7.1% year over year to $186.8 million as of Mar 31, 2017.
Strong Capital Position
Under the Advanced Approach, as of Mar 31, 2017, Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 14.2%, 15.6% and 8.2% respectively, each exceeding the regulatory requirements.
During first-quarter 2017, Northern Trust repurchased 0.8 million shares for $70.1 million at an average price of $86.39 per share. This includes shares related to share-based compensation.
Our Viewpoint
Results of Northern Trust display a decent performance in the reported quarter. We remain optimistic by the continued growth in assets under custody, revenues and an improving credit quality to some extent. However, increase in expenses might pose a threat to the company’s profitability. Further, the new regulations could put pressure on the company’s fundamentals.
Northern Trust Corporation Price, Consensus and EPS Surprise
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 8.9% in first-quarter 2017, riding on higher revenues. The company’s earnings per share of $1.35 for the quarter outpaced the Zacks Consensus Estimate of $1.24. Also, earnings compared favorably with the year-ago figure of $1.10 per share. Notably, results reflect one-time adjustments of 1 cent.
Driven by net interest income, Wells Fargo & Company’s (WFC - Free Report) first-quarter 2017 earnings recorded a positive surprise of about 3.1%. Earnings of $1.00 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, the figure compared favorably with the prior-year quarter’s earnings of 99 cents per share.
M&T Bank Corporation (MTB - Free Report) recorded a positive earnings surprise of 10.8% in first-quarter 2017. The company reported net operating earnings of $2.15 per share which surpassed the Zacks Consensus Estimate of $1.94. Also, the bottom line improved 15% year over year.
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Northern Trust (NTRS) Q1 Earnings Beat, Expenses Escalate
Riding on higher revenues, Northern Trust Corporation (NTRS - Free Report) reported a positive earnings surprise of 1.9% in first-quarter 2017. Earnings per share came in at $1.09, beating the Zacks Consensus Estimate of $1.07. Further, the reported figure compared favorably with $1.03 recorded in the year-ago quarter.
Better-than-expected results were stemmed by top-line growth and credit provisions. In addition, the quarter witnessed a rise in assets under custody as well assets under management. However, escalating operating expenses were a concern.
Net income came in at $276.1 million, up 13% from the prior-year quarter.
Top Line Grows, Costs Escalate
Total revenue of $1.29 billion surpassed the Zacks Consensus Estimate of $1.28 billion. Moreover, the reported figure was up 8% year over year.
On a fully taxable equivalent basis, net interest income of $362.4 million was up 15% year over year. This was driven by increased levels of average earning assets and higher net interest margin.
Net interest margin (NIM) was 1.35%, up 14 basis points from the prior-year quarter. The increase chiefly reflected higher short-term interest rates and reduced premium amortization.
Non-interest income rose 6% from the year-ago quarter to $930.9 million. Rise in trust, investment and other servicing fees, along with rise in security commissions and trading income, and other operating income were the primary reasons for this increase. These positives were partially offset by reduced foreign exchange trading income and lower treasury management fees.
Non-interest expenses were up 8% year over year to $894.5 million in the quarter. The rise was mainly driven by an elevation in mostly all components of expenses.
Improvement in Assets Under Management and Custody
As of Mar 31, 2017, Northern Trust’s total assets under custody increased 14% year over year to $7.11 trillion, while total assets under management rose 11% to $1.0 trillion.
Credit Quality: A Mixed Bag
Total allowance for credit losses came in at $189 million, down 19% year over year. Net charge-offs were $2 million, down 25.9% from the year-ago quarter figure. Also, credit provision was $1.0 million in the quarter compared with provision of $2.0 million in the prior-year quarter.
However, non-performing assets increased 7.1% year over year to $186.8 million as of Mar 31, 2017.
Strong Capital Position
Under the Advanced Approach, as of Mar 31, 2017, Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 14.2%, 15.6% and 8.2% respectively, each exceeding the regulatory requirements.
During first-quarter 2017, Northern Trust repurchased 0.8 million shares for $70.1 million at an average price of $86.39 per share. This includes shares related to share-based compensation.
Our Viewpoint
Results of Northern Trust display a decent performance in the reported quarter. We remain optimistic by the continued growth in assets under custody, revenues and an improving credit quality to some extent. However, increase in expenses might pose a threat to the company’s profitability. Further, the new regulations could put pressure on the company’s fundamentals.
Northern Trust Corporation Price, Consensus and EPS Surprise
Northern Trust Corporation Price, Consensus and EPS Surprise | Northern Trust Corporation Quote
Currently, Northern Trust carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other Major Banks
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 8.9% in first-quarter 2017, riding on higher revenues. The company’s earnings per share of $1.35 for the quarter outpaced the Zacks Consensus Estimate of $1.24. Also, earnings compared favorably with the year-ago figure of $1.10 per share. Notably, results reflect one-time adjustments of 1 cent.
Driven by net interest income, Wells Fargo & Company’s (WFC - Free Report) first-quarter 2017 earnings recorded a positive surprise of about 3.1%. Earnings of $1.00 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, the figure compared favorably with the prior-year quarter’s earnings of 99 cents per share.
M&T Bank Corporation (MTB - Free Report) recorded a positive earnings surprise of 10.8% in first-quarter 2017. The company reported net operating earnings of $2.15 per share which surpassed the Zacks Consensus Estimate of $1.94. Also, the bottom line improved 15% year over year.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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