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Northern Trust (NTRS) Q4 Earnings Beat Estimates, NII Dips Y/Y
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Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impact of loss on available for sale debt securities and FDIC special assessment fees) of $1.46 surpassed the Zacks Consensus Estimate of $1.33. However, the bottom line declined 11.5% year over year.
Results have been affected by a fall in net interest income (NII). Deterioration in the credit quality was another headwind. Nonetheless, rising fee income was a positive.Also, an increase in total assets under custody (AUC) and assets under management (AUM) balances supported financials.
Net income was $113.1 million, down 27% year over year.
In 2023, earnings were $5.08 per share, down 17.5% from the prior year. Net income also declined 17.1% to $1.11 billion.
Revenues Increase, Costs Rise
Quarterly total revenues (GAAP basis) of $1.55 billion were up 1.7% year over year. However, the top line missed the Zacks Consensus Estimate of $1.66 billion.
In 2023, total revenues grew marginally to $6.77 billion. The top line lagged the consensus estimate of $6.88 billion.
NII was $501.1 million in the quarter under review, down 8.9% year over year. The net interest margin was 1.59%, falling from 1.63% in the prior-year quarter.
Trust, investment and other servicing fees totaled $1.1 billion, up 4.6% from the year-ago quarter. Other non-interest loss was $27.8 million compared with $57.6 million in the prior-year quarter.
Non-interest expenses increased 5% to $1.39 billion in the reported quarter. The uptick stemmed from an elevation in all components except occupancy, compensation and employee benefits costs.
AUM and AUC Rise
As of Dec 31, 2023, Northern Trust’s total AUC increased 124% year over year to $11.92 trillion. Also, total AUM rose 15% to $1.43 trillion.
Credit Quality Deteriorates
Total allowance for credit losses was $220.4 million, increasing 10% year over year. NTRS recorded provisions for credit losses of $11 million in the fourth quarter compared with $5 million in the year-ago quarter.
Total non-accrual assets jumped 41.8% to $65.1 million as of Dec 31, 2023.
Capital Ratios Improve, Profitability Declines
Under the Standardized Approach, as of Dec 31, 2023, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 11.4%, 14.2% and 8.1% compared with 10.8%, 13.9% and 7.1%, respectively, in the prior-year quarter.
Return on average assets was 0.33%, down from 0.42% in the year-ago quarter. Also, the return on average common equity was 4% compared with the year-earlier quarter’s 5.9%.
Capital Deployment Activities
In the reported quarter, Northern Trust returned $302.4 million to shareholders through share repurchases and dividends.
Our Viewpoint
NTRS’ fourth-quarter performance was affected by a decline in NII. Also, escalating expenses may threaten the company’s profitability in the upcoming quarters. Nonetheless, rising fee income as well as increasing AUC and AUM balances are likely to support financials.
Northern Trust Corporation Price, Consensus and EPS Surprise
Citigroup Inc.’s (C - Free Report) fourth-quarter 2023 earnings per share (excluding the impact of notable items) of 84 cents surpassed the Zacks Consensus Estimate of 73 cents. Including the impact of notable items in the quarter, C recorded loss per share of $1.16. It registered earnings of $1.16 a year ago.
It witnessed growth in total loans and deposits in the reported quarter. However, a decline in revenues and deteriorating credit quality are near-term woes.
Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters.
Results have benefited from higher non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, a decline in NII, worsening credit quality and a dip in loan balances were the undermining factors for WFC.
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Northern Trust (NTRS) Q4 Earnings Beat Estimates, NII Dips Y/Y
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impact of loss on available for sale debt securities and FDIC special assessment fees) of $1.46 surpassed the Zacks Consensus Estimate of $1.33. However, the bottom line declined 11.5% year over year.
Results have been affected by a fall in net interest income (NII). Deterioration in the credit quality was another headwind. Nonetheless, rising fee income was a positive.Also, an increase in total assets under custody (AUC) and assets under management (AUM) balances supported financials.
Net income was $113.1 million, down 27% year over year.
In 2023, earnings were $5.08 per share, down 17.5% from the prior year. Net income also declined 17.1% to $1.11 billion.
Revenues Increase, Costs Rise
Quarterly total revenues (GAAP basis) of $1.55 billion were up 1.7% year over year. However, the top line missed the Zacks Consensus Estimate of $1.66 billion.
In 2023, total revenues grew marginally to $6.77 billion. The top line lagged the consensus estimate of $6.88 billion.
NII was $501.1 million in the quarter under review, down 8.9% year over year. The net interest margin was 1.59%, falling from 1.63% in the prior-year quarter.
Trust, investment and other servicing fees totaled $1.1 billion, up 4.6% from the year-ago quarter. Other non-interest loss was $27.8 million compared with $57.6 million in the prior-year quarter.
Non-interest expenses increased 5% to $1.39 billion in the reported quarter. The uptick stemmed from an elevation in all components except occupancy, compensation and employee benefits costs.
AUM and AUC Rise
As of Dec 31, 2023, Northern Trust’s total AUC increased 124% year over year to $11.92 trillion. Also, total AUM rose 15% to $1.43 trillion.
Credit Quality Deteriorates
Total allowance for credit losses was $220.4 million, increasing 10% year over year. NTRS recorded provisions for credit losses of $11 million in the fourth quarter compared with $5 million in the year-ago quarter.
Total non-accrual assets jumped 41.8% to $65.1 million as of Dec 31, 2023.
Capital Ratios Improve, Profitability Declines
Under the Standardized Approach, as of Dec 31, 2023, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 11.4%, 14.2% and 8.1% compared with 10.8%, 13.9% and 7.1%, respectively, in the prior-year quarter.
Return on average assets was 0.33%, down from 0.42% in the year-ago quarter. Also, the return on average common equity was 4% compared with the year-earlier quarter’s 5.9%.
Capital Deployment Activities
In the reported quarter, Northern Trust returned $302.4 million to shareholders through share repurchases and dividends.
Our Viewpoint
NTRS’ fourth-quarter performance was affected by a decline in NII. Also, escalating expenses may threaten the company’s profitability in the upcoming quarters. Nonetheless, rising fee income as well as increasing AUC and AUM balances 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 #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.’s (C - Free Report) fourth-quarter 2023 earnings per share (excluding the impact of notable items) of 84 cents surpassed the Zacks Consensus Estimate of 73 cents. Including the impact of notable items in the quarter, C recorded loss per share of $1.16. It registered earnings of $1.16 a year ago.
It witnessed growth in total loans and deposits in the reported quarter. However, a decline in revenues and deteriorating credit quality are near-term woes.
Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters.
Results have benefited from higher non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, a decline in NII, worsening credit quality and a dip in loan balances were the undermining factors for WFC.