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Northern Trust (NTRS) Rides on Organic Growth Amid High Costs
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Northern Trust Corp. (NTRS - Free Report) is well-poised for revenue growth on the back of steady loan demand. The company’s capital distribution activities are backed by a strong liquidity profile. However, rising expenses and the current challenging macroeconomic environment are worrisome.
Northern Trust's key strength lies in its organic growth, which is evident in its revenue and loan growth narrative. Revenues witnessed a CAGR of 3.5% over the last three years (2020-2023), driven by rising non-interest income and net interest income (NII), with some annual volatility. The upward trend persisted in the first half of 2024, with both NII and non-interest income experiencing a year-over-year increase.
Additionally, the company’s loan and lease balance witnessed a CAGR of 7.7% in the last three years (ending 2023), with the uptick continuing in the first half of 2024. NTRS’ robust pipelines in the Asset Servicing and Wealth Management segments are likely to drive organic growth in the upcoming period.
Northern Trust has taken measures to reinstate its operating leverage over the upcoming quarters. The company is focused on disciplined headcount management, vendor consolidation, rationalization of its real estate footprint and process automation. Through such efforts, the company will likely improve productivity and meet its financial targets.
NTRS has an impressive capital distribution plan. In July 2022, the company hiked its quarterly dividend by 7% to 75 cents per share. In October 2021, the company announced a 25-million share repurchase program with no expiration date. In the first half of 2024, the company repurchased approximately 4.6 million shares for $383 million. Management expects to increase the level of share repurchases in the upcoming quarters compared with the current level.
As of Jun 30, 2024, Northern Trust’s total debt (comprising long-term debt and other borrowings) was $10.9 billion, down from the prior-year level. The Federal Reserve and other Central Bank deposits totaled $43.2 billion as of the same date. The higher level of liquid assets compared with the company’s obligations makes the debt levels seem manageable. Given the solid liquidity position, the company’s capital distribution activities seem sustainable.
Shares of Northern Trust have gained 5.9% over the past six months compared with the industry’s growth of 10.4%.
Image Source: Zacks Investment Research
NTRS currently carries a Zacks Rank #3 (Hold).
However, the company has been recording a steady rise in expenses. Non-interest expenses witnessed a CAGR of 6.7% over the last three years (2020-2023). The trend continued in the first six months of 2024. Northern Trust’s expenses are expected to remain high on rising compensation as well as investment in equipment and software expenses to further modernize its technology infrastructure and enhance resiliencies.
Changing conditions of the global financial markets and general economic conditions could affect NTRS’ businesses. Weak economic conditions affected wealth creation, investment preferences, trading activities and savings patterns, which, in turn, impacted the demand for trust and investment products and services. Amid volatile equity markets, a reduction in transaction volumes might affect earnings in the coming quarters.
Stocks to Consider
Some better-ranked bank stocks worth mentioning are Bank of America Corporation (BAC - Free Report) and BankUnited, Inc. (BKU - Free Report) .
Bank of America’s earnings estimates for the current year have been revised upward slightly in the past seven days. The company’s shares have gained 11.5% over the past six months. At present, BAC carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BankUnited’s 2024 earnings estimates have moved north by 3.2% in the past 30 days. The stock has gained 31.7% over the past six months. Currently, BKU also carries a Zacks Rank #2.
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Northern Trust (NTRS) Rides on Organic Growth Amid High Costs
Northern Trust Corp. (NTRS - Free Report) is well-poised for revenue growth on the back of steady loan demand. The company’s capital distribution activities are backed by a strong liquidity profile. However, rising expenses and the current challenging macroeconomic environment are worrisome.
Northern Trust's key strength lies in its organic growth, which is evident in its revenue and loan growth narrative. Revenues witnessed a CAGR of 3.5% over the last three years (2020-2023), driven by rising non-interest income and net interest income (NII), with some annual volatility. The upward trend persisted in the first half of 2024, with both NII and non-interest income experiencing a year-over-year increase.
Additionally, the company’s loan and lease balance witnessed a CAGR of 7.7% in the last three years (ending 2023), with the uptick continuing in the first half of 2024. NTRS’ robust pipelines in the Asset Servicing and Wealth Management segments are likely to drive organic growth in the upcoming period.
Northern Trust has taken measures to reinstate its operating leverage over the upcoming quarters. The company is focused on disciplined headcount management, vendor consolidation, rationalization of its real estate footprint and process automation. Through such efforts, the company will likely improve productivity and meet its financial targets.
NTRS has an impressive capital distribution plan. In July 2022, the company hiked its quarterly dividend by 7% to 75 cents per share. In October 2021, the company announced a 25-million share repurchase program with no expiration date. In the first half of 2024, the company repurchased approximately 4.6 million shares for $383 million. Management expects to increase the level of share repurchases in the upcoming quarters compared with the current level.
As of Jun 30, 2024, Northern Trust’s total debt (comprising long-term debt and other borrowings) was $10.9 billion, down from the prior-year level. The Federal Reserve and other Central Bank deposits totaled $43.2 billion as of the same date. The higher level of liquid assets compared with the company’s obligations makes the debt levels seem manageable. Given the solid liquidity position, the company’s capital distribution activities seem sustainable.
Shares of Northern Trust have gained 5.9% over the past six months compared with the industry’s growth of 10.4%.
Image Source: Zacks Investment Research
NTRS currently carries a Zacks Rank #3 (Hold).
However, the company has been recording a steady rise in expenses. Non-interest expenses witnessed a CAGR of 6.7% over the last three years (2020-2023). The trend continued in the first six months of 2024. Northern Trust’s expenses are expected to remain high on rising compensation as well as investment in equipment and software expenses to further modernize its technology infrastructure and enhance resiliencies.
Changing conditions of the global financial markets and general economic conditions could affect NTRS’ businesses. Weak economic conditions affected wealth creation, investment preferences, trading activities and savings patterns, which, in turn, impacted the demand for trust and investment products and services. Amid volatile equity markets, a reduction in transaction volumes might affect earnings in the coming quarters.
Stocks to Consider
Some better-ranked bank stocks worth mentioning are Bank of America Corporation (BAC - Free Report) and BankUnited, Inc. (BKU - Free Report) .
Bank of America’s earnings estimates for the current year have been revised upward slightly in the past seven days. The company’s shares have gained 11.5% over the past six months. At present, BAC carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BankUnited’s 2024 earnings estimates have moved north by 3.2% in the past 30 days. The stock has gained 31.7% over the past six months. Currently, BKU also carries a Zacks Rank #2.