Northern Trust Q3 Profit Edges Down, Results Miss Estimates

(RTTNews) - Regional bank Northern Trust Corp. (NTRS) reported Wednesday a profit for the third quarter that edged down from last year, despite revenue growth, reflecting higher non-interest expense and absence of a gain. Both earnings per share and quarterly revenues missed analysts' expectations.

"Our financial performance in the third quarter of 2014 reflects continued growth in our business serving personal and institutional clients. Trust, investment and other servicing fees, which represent two-thirds of our revenue, increased 11% compared to last year," Chairman and CEO Frederick Waddell said in a statement.

Chicago-based custodian bank reported net income allocated to common and potential common shares of $201.0 million or $0.84 per share for the third quarter, compared to $203.0 million or $0.84 per share in the prior-year quarter, which included a pre-tax gain of $32.6 million on the sale of an office building property.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $0.87 per share for the quarter. Analysts' estimates typically exclude one-time items.

Consolidated revenues for the quarter grew 3 percent to $1.08 billion from $1.05 billion in the same quarter last year, but missed fourteen Wall Street analysts' consensus estimate of $1.10 billion.

Non-interest income, which represents 77 percent of revenues, increased 2 percent from last year to $829.6 million, primarily reflecting an 11 percent growth in trust, investment and other servicing fees to $718.2 million, partially offset by 26 percent lower foreign exchange trading income.

Net interest income on a fully taxable equivalent basis increased 5 percent to $249.3 million from last year, primarily due to higher levels of average earning assets, partially offset by a continued decline in net interest margin.

Net interest margin on a fully taxable equivalent basis decreased to 1.05 percent from last year's 1.14 percent. Meanwhile, there were no provision for credit losses this quarter, compared to last year's $5 million.

Noninterest expense for the quarter increased 5 percent to $774.7 million, primarily reflecting higher compensation as well as equipment and software expenses and employee benefits.

Total assets under custody increased 13 percent to $5.91 trillion, and assets under management grew 9 percent to $923.3 billion from last year, with new business and higher equity markets contributing to the strong growth.

"Our pre-tax profit margin improved to 28.2% in the quarter and our return on equity was 10.1%. This performance reflects ongoing efforts focused on growing our client franchise while achieving sustainable improvements in productivity," Waddell added.

In Wednesday's regular trading session, NTRS is currently trading at $62.64, down $2.83 or 4.32% on a volume of 0.63 million shares.