NORTHERN TRUST CORPORATION NEWS RELEASE
www.northerntrust.com
INVESTOR CONTACT: Jennifer Childe | 312-444-3290 | Jennifer.Childe@ntrs.com | MEDIA CONTACT: Doug Holt | 312-662-8315 | Doug.Holt@ntrs.com |
NORTHERN TRUST CORPORATION REPORTS FIRST QUARTER
NET INCOME OF $334.6 MILLION, EARNINGS PER DILUTED COMMON
SHARE OF $1.51
Revenue of $1.7 billion
Return on Average
Common Equity 12.4%
Common Equity Tier 1
Capital 11.3%
CHICAGO, APRIL 25, 2023 - Northern Trust Corporation today reported first quarter net income per diluted common share of $1.51, compared to $0.71 in the fourth quarter of 2022 and $1.77 in the first quarter of 2022. Net income was $334.6 million, compared to $155.7 million in the prior quarter and $389.3 million in the prior-year quarter.
MICHAEL O'GRADY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER:
"The recent disruptions in the banking sector reinforce the importance of Northern Trust's 130 year track record of strength and stability. New and existing clients have consistently turned to us for their liquidity needs during periods of market stress, and the first quarter of 2023 was no exception."
"Our results for the quarter reflect year-over-year revenue growth of 2% and a return on common equity of 12.4%. Expense growth moderated compared to the previous quarter as we balanced spending discipline against investments to drive future growth. As we look ahead, we remain well-positioned to support our clients' needs while successfully navigating the ever-shifting macroeconomic environment."
FINANCIAL SUMMARY & KEY METRICS
% Change Q1 2023 | |||||||||
vs. | |||||||||
($ In Millions except per share data) | Q1 2023 | Q4 2022 | Q1 2022 | Q4 2022 | Q1 2022 | ||||
Trust, Investment and Other Servicing Fees | $ | 1,063.6 | $ | 1,042.1 | $ | 1,168.4 | 2 % | (9)% | |
Other Noninterest Income (Loss)* | 149.8 | (57.6) | 169.3 | N/M | (11) | ||||
Net Interest Income (FTE**) | 544.4 | 550.0 | 387.7 | (1) | 40 | ||||
Total Revenue (FTE**) | $ | 1,757.8 | $ | 1,534.5 | $ | 1,725.4 | 15 % | 2 % | |
Noninterest Expense | $ | 1,285.6 | $ | 1,323.6 | $ | 1,205.9 | (3)% | 7 % | |
Provision for Credit Losses | 15.0 | 5.0 | 2.0 | N/M | N/M | ||||
Provision for Income Taxes | 109.4 | 34.7 | 121.5 | N/M | (10) | ||||
FTE Adjustment** | 13.2 | 15.5 | 6.7 | (15) | 98 | ||||
Net Income | $ | 334.6 | $ | 155.7 | $ | 389.3 | 115 % | (14)% | |
Earnings Allocated to Common and Potential Common Shares | $ | 315.2 | $ | 148.7 | $ | 370.0 | 112 % | (15)% | |
Diluted Earnings per Common Share | $ | 1.51 | $ | 0.71 | $ | 1.77 | 113 % | (15)% | |
Return on Average Common Equity | 12.4 % | 5.9 % | 14.2 % | ||||||
Return on Average Assets | 0.92 % | 0.42 % | 0.97 % | ||||||
Average Assets | $ | 148,059.9 | $ | 147,803.6 | $ | 162,143.0 | - % | (9)% |
N/M - Not meaningful
- Other Noninterest Income (Loss) in Q4 2022 included a $213.0 million pre-tax loss recognized in conjunction with the intent to sell certain available for sale securities.
- Net interest income and total revenue presented on a fully taxable equivalent (FTE) basis are non-generally accepted accounting principle financial measures that facilitate the analysis of asset yields. Please refer to the Reconciliation to Fully Taxable Equivalent section for further detail.
NORTHERN TRUST CORPORATION FIRST QUARTER 2023 RESULTS
CLIENT ASSETS
Assets under custody/administration (AUC/A) and assets under management are a driver of the Corporation's trust, investment and other servicing fees, the largest component of noninterest income.
As of | % Change March 31, 2023 vs. | ||||||||
($ In Billions) | March 31, 2023* | December 31, | March 31, 2022 | December 31, | March 31, 2022 | ||||
2022 | 2022 | ||||||||
Assets Under Custody/Administration | |||||||||
Asset Servicing | $ | 13,221.5 | $ | 12,705.5 | $ | 14,513.0 | 4 % | (9)% | |
Wealth Management | 953.3 | 898.5 | 1,031.1 | 6 | (8) | ||||
Total Assets Under Custody/Administration | $ | 14,174.8 | $ | 13,604.0 | $ | 15,544.1 | 4 % | (9)% | |
Assets Under Custody(1) | |||||||||
Asset Servicing | $ | 10,065.6 | $ | 9,712.3 | $ | 10,987.5 | 4 % | (8)% | |
Wealth Management | 947.6 | 892.3 | 1,022.9 | 6 | (7) | ||||
Total Assets Under Custody | $ | 11,013.2 | $ | 10,604.6 | $ | 12,010.4 | 4 % | (8)% | |
Assets Under Management | |||||||||
Asset Servicing | $ | 962.1 | $ | 898.1 | $ | 1,091.6 | 7 % | (12)% | |
Wealth Management | 368.3 | 351.4 | 396.2 | 5 | (7) | ||||
Total Assets Under Management | $ | 1,330.4 | $ | 1,249.5 | $ | 1,487.8 | 6 % | (11)% |
- Assets Under Custody are a component of Assets Under Custody/Administration.
- Client assets for the current quarter are considered preliminary until the Form 10-Q is filed with the Securities and Exchange Commission.
TRUST, INVESTMENT AND OTHER SERVICING FEES
% Change Q1 2023 vs. | |||||||||
($ In Millions) | Q1 2023 | Q4 2022 | Q1 2022 | Q4 2022 | Q1 2022 | ||||
Asset Servicing Trust, Investment and Other Servicing Fees | |||||||||
Custody and Fund Administration | $ | 413.6 | $ | 406.3 | $ | 452.7 | 2 % | (9)% | |
Investment Management | 126.2 | 123.8 | 146.9 | 2 | (14) | ||||
Securities Lending | 19.1 | 19.3 | 18.8 | (1) | 1 | ||||
Other | 44.1 | 38.6 | 44.0 | 14 | - | ||||
Total Asset Servicing | $ | 603.0 | $ | 588.0 | $ | 662.4 | 3 % | (9)% | |
Wealth Management Trust, Investment and Other Servicing Fees | |||||||||
Central | $ | 163.6 | $ | 162.2 | $ | 181.7 | 1 % | (10)% | |
East | 119.8 | 117.8 | 134.0 | 2 | (11) | ||||
West | 91.2 | 89.5 | 101.4 | 2 | (10) | ||||
Global Family Office (GFO) | 86.0 | 84.6 | 88.9 | 2 | (3) | ||||
Total Wealth Management | $ | 460.6 | $ | 454.1 | $ | 506.0 | 1 % | (9)% | |
Total Consolidated Trust, Investment and Other Servicing Fees | $ | 1,063.6 | $ | 1,042.1 | $ | 1,168.4 | 2 % | (9)% | |
Asset Servicing and Wealth Management trust, investment and other servicing fees are impacted by both one-month and one- quarter lagged asset values.
Total Asset Servicing trust, investment and other servicing fees increased sequentially and decreased from the prior-year quarter.
- Custody and fund administration fees increased sequentially primarily due to favorable markets, favorable currency translation and new business, partially offset by lower transaction volumes and nonrecurring fees in the prior quarter. Custody and fund administration fees decreased from the prior-year quarter primarily due to unfavorable markets and unfavorable currency translation.
- Investment management fees increased sequentially primarily due to favorable markets, partially offset by asset outflows. Investment management fees decreased from the prior-year quarter primarily due to asset outflows and unfavorable markets, partially offset by lower money market fund fee waivers.
- Other trust, investment and other servicing fees increased sequentially primarily due to higher fees associated with seasonal benefit payment services.
Total Wealth Management trust, investment and other servicing fees increased sequentially and decreased from the prior- year quarter.
- Fees in the regions (Central, East and West) increased sequentially primarily due to favorable markets, partially offset by product-related asset outflows. Fees in the regions decreased from the prior-year quarter primarily due to unfavorable markets and product-related asset outflows, partially offset by lower money market fund fee waivers.
2
NORTHERN TRUST CORPORATION FIRST QUARTER 2023 RESULTS
OTHER NONINTEREST INCOME
% Change Q1 2023 vs. | |||||||||
($ In Millions) | Q1 2023 | Q4 2022 | Q1 2022 | Q4 2022 | Q1 2022 | ||||
Other Noninterest Income | |||||||||
Foreign Exchange Trading Income | $ | 53.0 | $ | 65.4 | $ | 80.9 | (19)% | (35)% | |
Treasury Management Fees | 8.4 | 8.3 | 11.1 | - | (25) | ||||
Security Commissions and Trading Income | 34.7 | 35.1 | 36.2 | (1) | (4) | ||||
Other Operating Income | 46.8 | 47.3 | 41.1 | (1) | 14 | ||||
Investment Security Gains (Losses), net | 6.9 | (213.7) | - | N/M | N/M | ||||
Total Other Noninterest Income (Loss) | $ | 149.8 | $ | (57.6) | $ | 169.3 | N/M | (11)% |
N/M - Not meaningful
Foreign exchange trading income decreased sequentially and compared to the prior-year quarter primarily driven by an unfavorable impact from foreign exchange swap activity and lower client volumes.
Other operating income increased compared to the prior-year quarter primarily driven by increased income related to a bank- owned life insurance program and other miscellaneous income, partially offset by higher expenses related to existing swap agreements related to Visa Inc. Class B common shares.
Investment security gains (losses), net had a $213.0 million loss in the prior quarter arising from the intent to sell certain available for sale debt securities that were written down to their fair value in the prior quarter and sold in the current quarter, which resulted in a $6.9 million gain upon sale.
NET INTEREST INCOME
% Change Q1 2023 vs. | |||||||||
($ In Millions) | Q1 2023 | Q4 2022 | Q1 2022 | Q4 2022 | Q1 2022 | ||||
Net Interest Income | |||||||||
Interest Income (FTE*) | $ | 1,468.6 | $ | 1,185.6 | $ | 390.2 | 24 % | N/M | |
Interest Expense | 924.2 | 635.6 | 2.5 | 45 | N/M | ||||
Net Interest Income (FTE*) | $ | 544.4 | $ | 550.0 | $ | 387.7 | (1)% | 40 % | |
Average Earning Assets | $ | 135,957 | $ | 133,789 | $ | 149,768 | 2% | (9)% | |
Net Interest Margin (FTE*) | 1.62 % | 1.63 % | 1.05 % | (1)bps | 57 bps |
- Interest income, net interest income and net interest margin presented on an FTE basis are non-generally accepted accounting principle financial measures that facilitate the analysis of asset yields. Please refer to the Reconciliation to Fully Taxable Equivalent section for further detail.
bps - basis points
Net interest income on an FTE basis decreased sequentially primarily due to a lower net interest margin, partially offset by higher average earning assets. Net interest income on an FTE basis increased compared to the prior-year quarter primarily due to a higher net interest margin, partially offset by lower average earning assets.
The net interest margin on an FTE basis decreased sequentially primarily due to an unfavorable balance sheet mix shift, offset by higher average interest rates. The net interest margin on an FTE basis increased from the prior-year quarter primarily due to higher average interest rates.
Average earning assets increased sequentially primarily due to increased funding from short-term borrowing activity, partially offset by lower levels of client deposits. For interest-earning assets, this manifested in higher levels of interest-bearing deposits with banks, partially offset by lower levels of securities.
Average earning assets decreased from the prior-year quarter primarily due to decreased funding from client deposits, partially offset by higher short-term borrowing activity. For interest-earning assets, this manifested in lower levels of securities and interest-bearing deposits with banks, partially offset by higher level of loans.
3
NORTHERN TRUST CORPORATION FIRST QUARTER 2023 RESULTS
PROVISION FOR CREDIT LOSSES
As of and for the three-months ended, | % Change March 31, 2023 vs. | ||||||||
($ In Millions) | March 31, | December 31, | March 31, | December 31, | March 31, | ||||
2023 | 2022 | 2022 | 2022 | 2022 | |||||
Allowance for Credit Losses | |||||||||
Beginning Allowance for Credit Losses | $ | 200.9 | $ | 195.9 | $ | 184.7 | 3 % | 9 % | |
Provision for Credit Losses | 15.0 | 5.0 | 2.0 | N/M | N/M | ||||
Net Recoveries (Charge-Offs) | (2.9) | - | 3.2 | N/M | N/M | ||||
Ending Allowance for Credit Losses | $ | 213.0 | $ | 200.9 | $ | 189.9 | 6 % | 12 % | |
Allowance assigned to: | |||||||||
Loans and Leases | $ | 159.9 | $ | 144.3 | $ | 136.3 | 11 % | 17 % | |
Undrawn Loan Commitments and | 34.3 | 38.5 | 37.5 | (11) | (8) | ||||
Standby Letters of Credit | |||||||||
Debt Securities and Other Financial Assets | 18.8 | 18.1 | 16.1 | 5 | 17 | ||||
Ending Allowance for Credit Losses | $ | 213.0 | $ | 200.9 | $ | 189.9 | 6 % | 12 % |
N/M - Not meaningful
Q1 2023
The provision in the current quarter was primarily due to an increase in the reserve evaluated on a collective basis, driven by growth in the size and duration of the commercial real estate portfolio, primarily in multi-family properties, partially offset by improvement in credit quality for the commercial and institutional segment. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
Q4 2022
The provision in the prior quarter was primarily due to an increase in the reserve evaluated on a collective basis, driven by growth in the commercial and institutional and commercial real estate portfolios and further deterioration in the macroeconomic outlook at the time, partially offset by improvement in portfolio quality for the commercial and institutional segment.
Q1 2022
The provision in the prior-year quarter was primarily due to an increase in the reserve evaluated on an individual basis for two commercial borrowers, partially offset by a slight decrease in the reserve evaluated on a collective basis. The decrease in the collective basis reserve was primarily due to continued improvements in credit quality mainly within the commercial real estate portfolio, partially offset by increases in the reserve driven by projected economic conditions at the time.
4
NORTHERN TRUST CORPORATION FIRST QUARTER 2023 RESULTS
NONINTEREST EXPENSE
% Change Q1 2023 vs. | |||||||||
($ In Millions) | Q1 2023 | Q4 2022 | Q1 2022 | Q4 2022 | Q1 2022 | ||||
Noninterest Expense | |||||||||
Compensation | $ | 595.2 | $ | 584.3 | $ | 563.9 | 2 % | 6 % | |
Employee Benefits | 101.0 | 103.6 | 104.3 | (3) | (3) | ||||
Outside Services | 210.8 | 232.9 | 213.4 | (9) | (1) | ||||
Equipment and Software | 231.7 | 229.4 | 193.5 | 1 | 20 | ||||
Occupancy | 61.3 | 65.7 | 51.1 | (7) | 20 | ||||
Other Operating Expense | 85.6 | 107.7 | 79.7 | (21) | 7 | ||||
Total Noninterest Expense | $ | 1,285.6 | $ | 1,323.6 | $ | 1,205.9 | (3)% | 7 % | |
End of Period Full-Time Equivalent Staff | 23,800 | 23,600 | 21,700 | 1 % | 10 % |
Compensation expense increased sequentially primarily due to higher incentives, partially offset by $30.4 million of severance- related charges recorded in the prior quarter. Compensation expense increased compared to the prior-year quarter primarily due to higher salary expense, partially offset by lower incentives and favorable currency translation.
Outside services expense decreased sequentially primarily due to lower technical services costs, consulting services, and legal services.
Equipment and software expense increased compared to the prior-year quarter primarily due to higher amortization as well as higher software costs driven by continued technology investments.
Occupancy expense decreased sequentially primarily due to $14.0 million of charges from the prior quarter related to early lease exits, partially offset by a $9.8 million charge in the current quarter. Occupancy expense increased compared to the prior- year quarter primarily due to a $9.8 million charge in the current quarter.
Other operating expense decreased sequentially primarily due to lower business promotion and staff-related expenses. Other operating expense increased compared to the prior-year quarter primarily due to higher business promotion expense.
PROVISION FOR INCOME TAX
% Change Q1 2023 vs. | |||||||||||
($ In Millions) | Q1 2023 | Q4 2022 | Q1 2022 | Q4 2022 | Q1 2022 | ||||||
Net Income | |||||||||||
Income before Income Taxes | $ | 444.0 | $ | 190.4 | $ | 510.8 | 133 | % | (13) | % | |
Provision for Income Taxes | 109.4 | 34.7 | 121.5 | N/M | (10) | ||||||
Net Income | $ | 334.6 | $ | 155.7 | $ | 389.3 | 115 | % | (14) | % | |
Effective Tax Rate | 24.6 % | 18.2 % | 23.8 % | 640 bps | 80 bps |
bps - basis points
The effective tax rate increased sequentially primarily due to the significant increase in pretax earnings while tax benefits from tax-credit investments and tax-exempt income slightly decreased, and a higher net tax impact from international operations. The effective tax rate increased from the prior-year quarter primarily due to a higher net tax impact from international operations and lower tax benefits from share-based compensation, partially offset by a higher level of tax benefits from tax-credit investments and tax-exempt income.
5
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Northern Trust Corporation published this content on 25 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 April 2023 11:20:02 UTC.
