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 SECOND QUARTER NET INCOME OF $331.8 MILLION, EARNINGS PER DILUTED COMMON SHARE OF $1.56
CHICAGO, JULY 19, 2023 - Northern Trust Corporation today reported second quarter net income per diluted common share of $1.56, compared to $1.51 in the first quarter of 2023 and $1.86 in the second quarter of 2022. Net income was $331.8 million, compared to $334.6 million in the prior quarter and $396.2 million in the prior-year quarter.
Second quarter 2023 results included the following:
- $38.7 million of pre-taxseverance-related charges (after-tax $29.2 million).
- $25.6 million pre-tax charge related to the write-off of an investment in a client capability (after-tax $19.3 million).
MICHAEL O'GRADY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER:
"Northern Trust's second quarter results reflected growth across each of our businesses, solid progress on our productivity initiatives and prudent capital management. We grew trust fees and revenue as compared to the prior quarter; kept expenses, excluding notable items, well-controlled; generated return on common equity in the middle of our target range; and returned $257 million to shareholders. As we enter the second half of the year, we remain vigilant in our efforts to grow and deepen our client franchise while driving greater efficiency in our operating model."
FINANCIAL SUMMARY & KEY METRICS
% Change Q2 2023 | |||||||||
vs. | |||||||||
($ In Millions except per share data) | Q2 2023 | Q1 2023 | Q2 2022 | Q1 2023 | Q2 2022 | ||||
Trust, Investment and Other Servicing Fees | $ | 1,096.3 | $ | 1,063.6 | $ | 1,143.4 | 3 % | (4)% | |
Other Noninterest Income (Loss) | 149.3 | 149.8 | 166.6 | - | (10) | ||||
Net Interest Income (FTE*) | 524.6 | 544.4 | 469.8 | (4) | 12 | ||||
Total Revenue (FTE*) | $ | 1,770.2 | $ | 1,757.8 | $ | 1,779.8 | 1 % | (1)% | |
Noninterest Expense | $ | 1,331.9 | $ | 1,285.6 | $ | 1,223.6 | 4 % | 9 % | |
(Release of) Provision for Credit Losses | (15.5) | 15.0 | 4.5 | N/M | N/M | ||||
Provision for Income Taxes | 108.9 | 109.4 | 144.4 | - | (25) | ||||
FTE Adjustment* | 13.1 | 13.2 | 11.1 | (1) | 17 | ||||
Net Income | $ | 331.8 | $ | 334.6 | $ | 396.2 | (1)% | (16)% | |
Earnings Allocated to Common and Potential Common Shares | $ | 323.7 | $ | 315.2 | $ | 388.3 | 3 % | (17)% | |
Diluted Earnings per Common Share | $ | 1.56 | $ | 1.51 | $ | 1.86 | 3 % | (16)% | |
Return on Average Common Equity | 12.4 % | 12.4 % | 15.7 % | ||||||
Return on Average Assets | 0.91 % | 0.92 % | 1.03 % | ||||||
Average Assets | $ | 145,899.6 | $ | 148,059.9 | $ | 154,084.1 | (1)% | (5)% |
N/M - Not meaningful
- 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 SECOND 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 June 30, 2023 vs. | ||||||||
($ In Billions) | June 30, 2023* | March 31, 2023 | June 30, 2022 | March 31, 2023 | June 30, 2022 | ||||
Assets Under Custody/Administration | |||||||||
Asset Servicing | $ | 13,483.5 | $ | 13,221.5 | $ | 12,812.2 | 2 % | 5 % | |
Wealth Management | 995.4 | 953.3 | 921.5 | 4 | 8 | ||||
Total Assets Under Custody/Administration | $ | 14,478.9 | $ | 14,174.8 | $ | 13,733.7 | 2 % | 5 % | |
Assets Under Custody(1) | |||||||||
Asset Servicing | $ | 10,295.7 | $ | 10,065.6 | $ | 9,771.2 | 2 % | 5 % | |
Wealth Management | 989.1 | 947.6 | 913.0 | 4 | 8 | ||||
Total Assets Under Custody | $ | 11,284.8 | $ | 11,013.2 | $ | 10,684.2 | 2 % | 6 % | |
Assets Under Management | |||||||||
Asset Servicing | $ | 989.8 | $ | 962.1 | $ | 950.0 | 3 % | 4 % | |
Wealth Management | 376.0 | 368.3 | 352.8 | 2 | 7 | ||||
Total Assets Under Management | $ | 1,365.8 | $ | 1,330.4 | $ | 1,302.8 | 3 % | 5 % |
- 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 Q2 2023 vs. | |||||||||
($ In Millions) | Q2 2023 | Q1 2023 | Q2 2022 | Q1 2023 | Q2 2022 | ||||
Asset Servicing Trust, Investment and Other Servicing Fees | |||||||||
Custody and Fund Administration | $ | 427.4 | $ | 413.6 | $ | 433.8 | 3 % | (1)% | |
Investment Management | 134.1 | 126.2 | 148.4 | 6 | (10) | ||||
Securities Lending | 21.5 | 19.1 | 21.6 | 13 | - | ||||
Other | 38.2 | 44.1 | 38.9 | (14) | (2) | ||||
Total Asset Servicing | $ | 621.2 | $ | 603.0 | $ | 642.7 | 3 % | (3)% | |
Wealth Management Trust, Investment and Other Servicing Fees | |||||||||
Central | $ | 166.0 | $ | 163.6 | $ | 177.4 | 2 % | (6)% | |
East | 124.1 | 119.8 | 128.1 | 4 | (3) | ||||
West | 93.7 | 91.2 | 98.7 | 3 | (5) | ||||
Global Family Office (GFO) | 91.3 | 86.0 | 96.5 | 6 | (5) | ||||
Total Wealth Management | $ | 475.1 | $ | 460.6 | $ | 500.7 | 3 % | (5)% | |
Total Consolidated Trust, Investment and Other Servicing Fees | $ | 1,096.3 | $ | 1,063.6 | $ | 1,143.4 | 3 % | (4)% | |
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 new business, higher transaction volumes, and favorable markets. Custody and fund administration fees decreased from the prior-year quarter primarily due to unfavorable markets.
- Investment management fees increased sequentially primarily due to asset inflows and favorable markets. Investment management fees decreased from the prior-year quarter primarily due to asset outflows and unfavorable markets.
- Other fees decreased sequentially primarily due to prior quarter 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. Fees in the regions decreased from the prior-year quarter primarily due to unfavorable markets and product-related asset outflows.
- Fees in GFO increased sequentially driven by net inflows. Fees in GFO decreased from the prior-year quarter primarily due to unfavorable markets.
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NORTHERN TRUST CORPORATION SECOND QUARTER 2023 RESULTS
OTHER NONINTEREST INCOME
% Change Q2 2023 vs. | |||||||||
($ In Millions) | Q2 2023 | Q1 2023 | Q2 2022 | Q1 2023 | Q2 2022 | ||||
Other Noninterest Income | |||||||||
Foreign Exchange Trading Income | $ | 50.1 | $ | 53.0 | $ | 77.6 | (5)% | (35)% | |
Treasury Management Fees | 7.9 | 8.4 | 10.6 | (4) | (24) | ||||
Security Commissions and Trading Income | 36.1 | 34.7 | 32.8 | 4 | 10 | ||||
Other Operating Income | 55.2 | 46.8 | 45.6 | 18 | 21 | ||||
Investment Security Gains (Losses), net | - | 6.9 | - | N/M | N/M | ||||
Total Other Noninterest Income (Loss) | $ | 149.3 | $ | 149.8 | $ | 166.6 | -% | (10)% |
N/M - Not meaningful
Foreign exchange trading income decreased compared to the prior-year quarter primarily driven by lower client volumes and an unfavorable impact from foreign exchange swap activity.
Security commissions and trading income increased compared to the prior-year quarter primarily due to higher bond underwriting referral fees.
Other operating income increased sequentially primarily due to higher non-trading foreign exchange income and banking and credit-related service fees. Other operating income increased compared to the prior-year quarter primarily driven by higher income associated with a market value increase in supplemental compensation plans, higher non-trading foreign exchange income, and banking and credit-related services fees, partially offset by higher expenses related to existing swap agreements related to Visa Inc. Class B common shares.
NET INTEREST INCOME
% Change Q2 2023 vs. | |||||||||
($ In Millions) | Q2 2023 | Q1 2023 | Q2 2022 | Q1 2023 | Q2 2022 | ||||
Net Interest Income | |||||||||
Interest Income (FTE*) | $ | 1,748.1 | $ | 1,468.6 | $ | 535.9 | 19 % | N/M | |
Interest Expense | 1,223.5 | 924.2 | 66.1 | 32 | N/M | ||||
Net Interest Income (FTE*) | $ | 524.6 | $ | 544.4 | $ | 469.8 | (4)% | 12 % | |
Average Earning Assets | $ | 134,116 | $ | 135,957 | $ | 139,902 | (1)% | (4)% | |
Net Interest Margin (FTE*) | 1.57 % | 1.62 % | 1.35 % | (5)bps | 22 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 lower average earning assets, partially offset by higher average interest rates. Net interest income on an FTE basis increased compared to the prior-year quarter primarily due to higher average interest rates, 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, partially 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, partially offset by an unfavorable balance sheet mix shift.
Average earning assets decreased sequentially and from the prior-year quarter primarily due to lower client deposits, partially offset by increased short-term borrowing activity.
3
NORTHERN TRUST CORPORATION SECOND QUARTER 2023 RESULTS
PROVISION FOR CREDIT LOSSES
As of and for the three-months ended, | % Change June 30, 2023 vs. | ||||||||
($ In Millions) | June 30, 2023 | March 31, 2023 | June 30, 2022 | March 31, | June 30, 2022 | ||||
2023 | |||||||||
Allowance for Credit Losses | |||||||||
Beginning Allowance for Credit Losses | $ | 213.0 | $ | 200.9 | $ | 189.9 | 6 % | 12 % | |
(Release of) Provision for Credit Losses | (15.5) | 15.0 | 4.5 | N/M | N/M | ||||
Net Recoveries (Charge-Offs) | - | (2.9) | 5.5 | (98) | (101) | ||||
Ending Allowance for Credit Losses | $ | 197.5 | $ | 213.0 | $ | 199.9 | (7)% | (1)% | |
Allowance assigned to: | |||||||||
Loans and Leases | $ | 152.5 | $ | 159.9 | $ | 138.2 | (5)% | 10 % | |
Undrawn Loan Commitments and | 26.0 | 34.3 | 43.5 | (24) | (40) | ||||
Standby Letters of Credit | |||||||||
Debt Securities and Other Financial Assets | 19.0 | 18.8 | 18.2 | 1 | 5 | ||||
Ending Allowance for Credit Losses | $ | 197.5 | $ | 213.0 | $ | 199.9 | (7)% | (1)% |
N/M - Not meaningful
Q2 2023
The release of credit reserves in the current quarter was primarily due to a decrease in the reserve evaluated on a collective basis, primarily driven by improved credit quality in certain commercial and institutional and certain commercial real estate (CRE) loans, partially offset by expectations for higher economic stress in the CRE market, particularly Office CRE. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
Q1 2023
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 size and duration of the CRE portfolio, primarily in multi-family properties, partially offset by improvement in credit quality for the commercial and institutional segment.
Q2 2022
The provision in the prior-year quarter was primarily due to an increase in the reserve evaluated on a collective basis, partially offset by recoveries in the prior-year quarter. The increase in the collective basis reserve was primarily driven by market conditions and a higher risk of recession at the time as compared to the previous period, partially offset by improvements in credit quality mainly within the CRE and commercial and institutional portfolios.
4
NORTHERN TRUST CORPORATION SECOND QUARTER 2023 RESULTS
NONINTEREST EXPENSE
% Change Q2 2023 vs. | |||||||||
($ In Millions) | Q2 2023 | Q1 2023 | Q2 2022 | Q1 2023 | Q2 2022 | ||||
Noninterest Expense | |||||||||
Compensation | $ | 604.5 | $ | 595.2 | $ | 546.5 | 2 % | 11 % | |
Employee Benefits | 101.4 | 101.0 | 119.6 | - | (15) | ||||
Outside Services | 230.9 | 210.8 | 213.1 | 10 | 8 | ||||
Equipment and Software | 229.3 | 231.7 | 203.5 | (1) | 13 | ||||
Occupancy | 53.8 | 61.3 | 51.0 | (12) | 6 | ||||
Other Operating Expense | 112.0 | 85.6 | 89.9 | 31 | 25 | ||||
Total Noninterest Expense | $ | 1,331.9 | $ | 1,285.6 | $ | 1,223.6 | 4 % | 9 % | |
End of Period Full-Time Equivalent Staff | 23,500 | 23,800 | 22,500 | (1)% | 4 % |
Compensation expense increased sequentially and for the prior-year quarter primarily due to $36.7 million of severance-related charges and higher salaries, partially offset by lower incentives.
Employee benefits expense decreased compared to the prior-year quarter primarily due to a $20.3 million pension settlement charge in the prior-year quarter.
Outside services expense increased sequentially and for the prior-year quarter primarily due to higher technical 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 a $9.8 million charge from the prior quarter related to early lease exits.
Other operating expense increased sequentially and for the prior-year quarter primarily due to a $25.6 million charge related to the write-off of an investment in a client capability.
PROVISION FOR INCOME TAX
% Change Q2 2023 vs. | |||||||||||
($ In Millions) | Q2 2023 | Q1 2023 | Q2 2022 | Q1 2023 | Q2 2022 | ||||||
Net Income | |||||||||||
Income before Income Taxes | $ | 440.7 | $ | 444.0 | $ | 540.6 | (1) | % | (18) | % | |
Provision for Income Taxes | 108.9 | 109.4 | 144.4 | - | (25) | ||||||
Net Income | $ | 331.8 | $ | 334.6 | $ | 396.2 | (1) | % | (16) | % | |
Effective Tax Rate | 24.7 % | 24.6 % | 26.7 % | 10 bps | (200)bps |
bps - basis points
The effective tax rate decreased from the prior-year quarter primarily due to a lower net tax impact from international operations.
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Northern Trust Corporation published this content on 19 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 July 2023 11:18:19 UTC.
