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Northern Trust (NTRS) Q3 Earnings & Revenues Miss Estimates
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Northern Trust Corporation’s (NTRS - Free Report) third-quarter 2022 earnings per share of $1.80 have missed the Zacks Consensus Estimate of $1.82. Nonetheless, the bottom line was flat year over year.
Higher revenues, aided by a rise in net interest income (“NII”), were driving factors. However, a rising expense base and weak capital ratios were headwinds.
Net income was $394.8 million, marginally down year over year from $395.7 million.
Revenues Climb, Costs Shoot Up
Total revenues of $1.75 billion were up 7% year over year. The top line missed the Zacks Consensus Estimate of $1.76 billion.
NII was $513 million in the third quarter, gaining 48% year over year mainly due to a higher net interest margin (“NIM”). NIM was 1.54%, increasing from 0.95% in the prior-year quarter.
Trust, investment and other servicing fees summed at $1.07 billion, down 3% year over year. Other non-interest income fell 8% from the year-ago quarter to $163.1 million.
Non-interest expenses increased 9% year over year to $1.22 billion in the third quarter. The upswing stemmed from an elevation in all components except for occupancy expenses.
AUM and AUC Fall
As of Sep 30, 2022, Northern Trust’s total assets under custody (“AUC”) declined 7% sequentially to $9.98 trillion, while total assets under management (“AUM”) fell 7% to $1.20 trillion.
Credit Quality Deteriorates
Credit metrics in the third quarter deteriorated. The total allowance for credit losses was $195.9 million, increasing slightly year over year. Net charge-offs were $4.5 million against recoveries of $1.1 million in the year-ago quarter. NTRS created provisions for credit losses of $0.5 million in the third quarter against reserve releases of $13 million in the prior-year quarter.
Total non-accrual assets plunged 45.9% to $76.4 million as of Sep 30, 2022.
Capital Ratios Weak, Profitability Ratios Improve
Under the Standardized Approach, as of Sep 30, 2022, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 10.1%, 12.2% and 7% compared with 11.9%, 14.3% and 7.1%, respectively, in the prior-year quarter. All ratios exceeded regulatory requirements.
Return on average assets was 1.07%, up from 1% in the year-ago quarter. Also, the return on average common equity was 14.9% compared with the year-earlier quarter’s 13.7%.
Capital Deployment Activities
In the quarter, Northern Trust returned $159.5 million to its shareholders through share repurchases and dividends. NTRS repurchased $1.1 million of common stock under its share-repurchase program and declared cash dividends totaling $158.4 million to its common stockholders. NTRS also cleared cash dividends worth $16.2 million to its preferred stockholders in the third quarter.
Our Viewpoint
Northern Trust’s third-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
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
TFC’S results were primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates increased NII, which was a major positive for Truist Financial.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory 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. The rise in non-interest expenses acted as another headwind.
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Northern Trust (NTRS) Q3 Earnings & Revenues Miss Estimates
Northern Trust Corporation’s (NTRS - Free Report) third-quarter 2022 earnings per share of $1.80 have missed the Zacks Consensus Estimate of $1.82. Nonetheless, the bottom line was flat year over year.
Higher revenues, aided by a rise in net interest income (“NII”), were driving factors. However, a rising expense base and weak capital ratios were headwinds.
Net income was $394.8 million, marginally down year over year from $395.7 million.
Revenues Climb, Costs Shoot Up
Total revenues of $1.75 billion were up 7% year over year. The top line missed the Zacks Consensus Estimate of $1.76 billion.
NII was $513 million in the third quarter, gaining 48% year over year mainly due to a higher net interest margin (“NIM”). NIM was 1.54%, increasing from 0.95% in the prior-year quarter.
Trust, investment and other servicing fees summed at $1.07 billion, down 3% year over year. Other non-interest income fell 8% from the year-ago quarter to $163.1 million.
Non-interest expenses increased 9% year over year to $1.22 billion in the third quarter. The upswing stemmed from an elevation in all components except for occupancy expenses.
AUM and AUC Fall
As of Sep 30, 2022, Northern Trust’s total assets under custody (“AUC”) declined 7% sequentially to $9.98 trillion, while total assets under management (“AUM”) fell 7% to $1.20 trillion.
Credit Quality Deteriorates
Credit metrics in the third quarter deteriorated. The total allowance for credit losses was $195.9 million, increasing slightly year over year. Net charge-offs were $4.5 million against recoveries of $1.1 million in the year-ago quarter. NTRS created provisions for credit losses of $0.5 million in the third quarter against reserve releases of $13 million in the prior-year quarter.
Total non-accrual assets plunged 45.9% to $76.4 million as of Sep 30, 2022.
Capital Ratios Weak, Profitability Ratios Improve
Under the Standardized Approach, as of Sep 30, 2022, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 10.1%, 12.2% and 7% compared with 11.9%, 14.3% and 7.1%, respectively, in the prior-year quarter. All ratios exceeded regulatory requirements.
Return on average assets was 1.07%, up from 1% in the year-ago quarter. Also, the return on average common equity was 14.9% compared with the year-earlier quarter’s 13.7%.
Capital Deployment Activities
In the quarter, Northern Trust returned $159.5 million to its shareholders through share repurchases and dividends. NTRS repurchased $1.1 million of common stock under its share-repurchase program and declared cash dividends totaling $158.4 million to its common stockholders. NTRS also cleared cash dividends worth $16.2 million to its preferred stockholders in the third quarter.
Our Viewpoint
Northern Trust’s third-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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
TFC’S results were primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates increased NII, which was a major positive for Truist Financial.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory 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. The rise in non-interest expenses acted as another headwind.