Northern Trust (NTRS) Q3 Earnings Lag Estimates, NII Dips Y/Y
Northern Trust Corporation’s NTRS third-quarter 2023 earnings per share of $1.49 missed the Zacks Consensus Estimate of $1.50. However, the bottom line declined 17% year over year.
Results have been affected by a fall in net interest income (NII). A deterioration in the credit quality was another headwind in the third quarter. However, a rising fee income was a positive.
Net income was $327.8 million, down 17% year over year.
Revenues Increase, Costs Rise
Quarterly total revenues (GAAP basis) of $1.73 billion were down 2% year over year. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $1.72 billion.
NII was $469.4 million in the quarter under review, down 11% year over year. The net interest margin was 1.45%, falling from 1.58% in the prior-year quarter.
Trust, investment and other servicing fees totaled $1.1 billion, up 3% from the year-ago quarter. Other non-interest income was $158.4 million, down 3% from the prior-year quarter.
Non-interest expenses increased 4% to $1.27 billion in the reported quarter.
AUM and AUC Fall
As of Sep 30, 2023, Northern Trust’s total assets under custody (AUC) decreased 2% year over year to $11.01 trillion. Also, total assets under management (AUM) fell 2% to $1.33 trillion.
Credit Quality Deteriorates
Total allowance for credit losses was $211.8 million, increasing 8% year over year. NTRS recorded provisions for credit losses of $14 million in the third quarter compared with $0.5 million in the year-ago quarter.
Total non-accrual assets plunged 9.5% to $69.1 million as of Sep 30, 2023.
Capital Ratios Improve, Profitability Declines
Under the Standardized Approach, as of Sep 30, 2023, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 11.4%, 14.5% and 7.9% compared with 11.3%, 12.2% and 7%, respectively, in the prior-year quarter.
Return on average assets was 0.93%, down from 1.07% in the year-ago quarter. Also, the return on average common equity was 11.6% compared with the year-earlier quarter’s 14.9%.
Capital Deployment Activities
In the reported quarter, Northern Trust returned $158.7 million to shareholders through share repurchases and dividends.
Our Viewpoint
NTRS’ third-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 is 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Wells Fargo & Company’s WFC third-quarter 2023 adjusted earnings per share of $1.39 outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. The adjusted figure excludes the impacts of discrete tax benefits related to the resolution of the prior-year period’s tax matters.
WFC’s results benefited from higher NII and non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the worsening credit quality and a dip in loan balances were the undermining factors.
Citigroup Inc.’s C third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, Citigroup witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, and the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.
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