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Northern Trust (NTRS) Struggles With Mounting Expenses

Zacks Equity Research

On Aug 22, we issued an updated research report on Northern Trust Corporation NTRS. The company’s escalating expenses are likely to impact its bottom-line growth. Also, rising nonperforming assets remain a concern. However, its strong capital position isa tailwind.

Northern Trust missed earnings estimates by 4.8% in second-quarter 2017. Results reflected higher expenses and a decline in non-interest income. Nevertheless, the quarter witnessed rise in assets under management and assets under custody.

The company's shares have remained flat year to date compared to the industry's rally of 4.3%.

Further, the Zacks Consensus Estimate for Northern Trust’s current-year earnings has been revised nearly 1% downward over the past 30 days. As a result, the stock carries a Zacks Rank #4 (Sell).

Northern Trust’s investments in technology have led to higher compensation and software expenses. Over the last five years (ended 2016) the company’s expenses have seen a compound annual growth rate of 1.4%. Further, the trend was witnessed in the first six months of 2017 as well. This mounting expense base is likely to deter bottom-line growth in the near term.

At the end of the second quarter, the company’s nonperforming assets (NPAs) amounted to about $166.7 million. Such elevated levels of NPAs do not bode well for the company as they impact the net interest income. Further, it also increases expenses as a result of the collection efforts involved.  

However, Northern Trust’s strong capital position supports its capital deployment activities. For third-quarter 2017, the company raised its common stock dividend by 10.5%. These steady capital deployment activities are likely to enhance shareholders’ confidence in the stock.

Better-Ranked Finance Stocks

People's Utah Bancorp’s PUB Zacks Consensus Estimate for current-year earnings has beenrevised 2.9% upward, over the last 30 days. Over the past year, its shares have surged 41.1%. The stock sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Zion Bancorporation’s ZION Zacks Consensus Estimate for current-year earnings has been revised 8.9% upward over the last 30 days. Also, its shares have gained 50.2% in a year’s time. It boasts a Zacks Rank #1.

Carolina Financial Corporation CARO witnessed an upward earnings estimate revision of 4.3% for the current year, over the last 30 days. Its share price has increased 56.7% in the past 12 months. The company currently sports a Zacks Rank #1.

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