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 THIRD QUARTER
NET INCOME OF $327.8 MILLION, EARNINGS PER DILUTED COMMON
SHARE OF $1.49
CHICAGO, OCTOBER 18, 2023 - Northern Trust Corporation today reported third quarter net income per diluted common share of $1.49, compared to $1.56 in the second quarter of 2023 and $1.80 in the third quarter of 2022. Net income was $327.8 million, compared to $331.8 million in the prior quarter and $394.8 million in the prior-year quarter.
MICHAEL O'GRADY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER:
"Northern Trust's third quarter results showcased the resilience of our business model in the midst of a challenging stage of this unprecedented interest rate cycle. We grew trust fees, expanded our client base, made further progress on our productivity initiatives, and enhanced our regulatory capital metrics. Our foundation remains strong and clients continue to place their trust in us. We are successfully navigating the challenging operating environment while positioning the company to capitalize on growth opportunities that will deliver value for our shareholders over the long term."
FINANCIAL SUMMARY & KEY METRICS
% Change Q3 2023 | |||||||||
vs. | |||||||||
($ In Millions except per share data) | Q3 2023 | Q2 2023 | Q3 2022 | Q2 2023 | Q3 2022 | ||||
Trust, Investment and Other Servicing Fees | $ | 1,111.9 | $ | 1,096.3 | $ | 1,078.7 | 1 % | 3 % | |
Other Noninterest Income (Loss) | 158.4 | 149.3 | 163.1 | 6 | (3) | ||||
Net Interest Income (FTE*) | 469.4 | 524.6 | 525.3 | (10) | (11) | ||||
Total Revenue (FTE*) | $ | 1,739.7 | $ | 1,770.2 | $ | 1,767.1 | (2)% | (2)% | |
Noninterest Expense | $ | 1,278.2 | $ | 1,331.9 | $ | 1,229.8 | (4)% | 4 % | |
Provision for (Release of) Credit Losses | 14.0 | (15.5) | 0.5 | N/M | N/M | ||||
Provision for Income Taxes | 106.5 | 108.9 | 129.7 | (2) | (18) | ||||
FTE Adjustment* | 13.2 | 13.1 | 12.3 | 1 | 8 | ||||
Net Income | $ | 327.8 | $ | 331.8 | $ | 394.8 | (1)% | (17)% | |
Earnings Allocated to Common and Potential Common Shares | $ | 308.5 | $ | 323.7 | $ | 375.4 | (5)% | (18)% | |
Diluted Earnings per Common Share | $ | 1.49 | $ | 1.56 | $ | 1.80 | (4)% | (17)% | |
Return on Average Common Equity | 11.6 % | 12.4 % | 14.9 % | ||||||
Return on Average Assets | 0.93 % | 0.91 % | 1.07 % | ||||||
Average Assets | $ | 140,201.6 | $ | 145,899.6 | $ | 146,402.2 | (4)% | (4)% |
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 THIRD 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 September 30, 2023 vs. | ||||||||
($ In Billions) | September 30, | June 30, 2023 | September 30, | June 30, 2023 | September 30, | ||||
2023* | 2022 | 2022 | |||||||
Assets Under Custody/Administration | |||||||||
Asset Servicing | $ | 13,206.2 | $ | 13,483.5 | $ | 11,954.0 | (2)% | 10 % | |
Wealth Management | 958.5 | 995.4 | 868.0 | (4) | 10 | ||||
Total Assets Under Custody/Administration | $ | 14,164.7 | $ | 14,478.9 | $ | 12,822.0 | (2)% | 10 % | |
Assets Under Custody(1) | |||||||||
Asset Servicing | $ | 10,064.4 | $ | 10,295.7 | $ | 9,125.5 | (2)% | 10 % | |
Wealth Management | 951.0 | 989.1 | 860.8 | (4) | 10 | ||||
Total Assets Under Custody | $ | 11,015.4 | $ | 11,284.8 | $ | 9,986.3 | (2)% | 10 % | |
Assets Under Management | |||||||||
Asset Servicing | $ | 963.4 | $ | 989.8 | $ | 873.7 | (3)% | 10 % | |
Wealth Management | 369.9 | 376.0 | 336.2 | (2) | 10 | ||||
Total Assets Under Management | $ | 1,333.3 | $ | 1,365.8 | $ | 1,209.9 | (2)% | 10 % |
- 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 Q3 2023 vs. | |||||||||
($ In Millions) | Q3 2023 | Q2 2023 | Q3 2022 | Q2 2023 | Q3 2022 | ||||
Asset Servicing Trust, Investment and Other Servicing Fees | |||||||||
Custody and Fund Administration | $ | 428.1 | $ | 427.4 | $ | 407.3 | - % | 5 % | |
Investment Management | 137.1 | 134.1 | 136.0 | 2 | 1 | ||||
Securities Lending | 20.4 | 21.5 | 21.7 | (6) | (6) | ||||
Other | 40.4 | 38.2 | 38.2 | 6 | 6 | ||||
Total Asset Servicing | $ | 626.0 | $ | 621.2 | $ | 603.2 | 1 % | 4 % | |
Wealth Management Trust, Investment and Other Servicing Fees | |||||||||
Central | $ | 172.3 | $ | 166.0 | $ | 171.3 | 4 % | 1 % | |
East | 126.1 | 124.1 | 124.1 | 2 | 2 | ||||
West | 95.8 | 93.7 | 92.5 | 2 | 4 | ||||
Global Family Office (GFO) | 91.7 | 91.3 | 87.6 | - | 5 | ||||
Total Wealth Management | $ | 485.9 | $ | 475.1 | $ | 475.5 | 2 % | 2 % | |
Total Consolidated Trust, Investment and Other Servicing Fees | $ | 1,111.9 | $ | 1,096.3 | $ | 1,078.7 | 1 % | 3 % | |
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 from the prior-year quarter.
- Custody and fund administration fees increased from the prior-year quarter primarily due to new business, favorable currency translation, and favorable markets, partially offset by lower transaction volumes.
- Investment management fees increased sequentially primarily due to favorable markets.
Total Wealth Management trust, investment and other servicing fees increased sequentially and from the prior-year quarter.
- Fees in the regions (Central, East and West) increased sequentially primarily due to favorable markets. Fees in the regions increased from the prior-year quarter primarily due to favorable markets, partially offset by product-related asset outflows.
- Fees in GFO increased from the prior-year quarter primarily due to asset inflows.
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NORTHERN TRUST CORPORATION THIRD QUARTER 2023 RESULTS
OTHER NONINTEREST INCOME
% Change Q3 2023 vs. | |||||||||
($ In Millions) | Q3 2023 | Q2 2023 | Q3 2022 | Q2 2023 | Q3 2022 | ||||
Other Noninterest Income | |||||||||
Foreign Exchange Trading Income | $ | 51.8 | $ | 50.1 | $ | 64.7 | 3 % | (20)% | |
Treasury Management Fees | 7.5 | 7.9 | 9.3 | (6) | (18) | ||||
Security Commissions and Trading Income | 30.9 | 36.1 | 32.1 | (14) | (4) | ||||
Other Operating Income | 68.2 | 55.2 | 57.3 | 23 | 19 | ||||
Investment Security Gains (Losses), net | - | - | (0.3) | N/M | N/M | ||||
Total Other Noninterest Income (Loss) | $ | 158.4 | $ | 149.3 | $ | 163.1 | 6% | (3)% |
N/M - Not meaningful
Foreign exchange trading income decreased compared to the prior-year quarter primarily driven by an unfavorable impact from foreign exchange swap activity and lower client volumes.
Security commissions and trading income decreased sequentially primarily due to lower interest rate swap activity.
Other operating income increased sequentially primarily due to higher income related to existing swap agreements related to Visa Inc. Class B common shares and higher income associated with a market value increase in supplemental compensation plans, partially offset by lower non-trading foreign exchange income. 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 banking and credit-related services fees, and higher income related to existing swap agreements related to Visa Inc. Class B common shares, partially offset by lower non-trading foreign exchange income and lower miscellaneous income.
NET INTEREST INCOME
% Change Q3 2023 vs. | |||||||||
($ In Millions) | Q3 2023 | Q2 2023 | Q3 2022 | Q2 2023 | Q3 2022 | ||||
Net Interest Income | |||||||||
Interest Income (FTE*) | $ | 1,948.2 | $ | 1,748.1 | $ | 811.6 | 11 % | 140 % | |
Interest Expense | 1,478.8 | 1,223.5 | 286.3 | 21 | N/M | ||||
Net Interest Income (FTE*) | $ | 469.4 | $ | 524.6 | $ | 525.3 | (10)% | (11)% | |
Average Earning Assets | $ | 128,254.4 | $ | 134,116.4 | $ | 132,146.5 | (4)% | (3)% | |
Net Interest Margin (FTE*) | 1.45 % | 1.57 % | 1.58 % | (12)bps | (13)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 higher funding costs and lower average earning assets. Net interest income on an FTE basis decreased compared to the prior-year quarter primarily due to lower average earning assets, partially offset by higher average interest rates.
The net interest margin on an FTE basis decreased sequentially primarily due to higher funding costs. The net interest margin on an FTE basis decreased from the prior-year quarter primarily due to an unfavorable funding mix shift, partially offset by higher average interest rates.
Average earning assets decreased sequentially primarily due to lower client deposits. Average earning assets decreased compared to the prior-year quarter primarily due to lower client deposits, partially offset by increased borrowing activity.
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NORTHERN TRUST CORPORATION THIRD QUARTER 2023 RESULTS
PROVISION FOR CREDIT LOSSES
As of and for the three-months ended, | % Change September 30, 2023 | ||||||||
vs. | |||||||||
($ In Millions) | September 30, | June 30, 2023 | September 30, | June 30, 2023 | September 30, | ||||
2023 | 2022 | 2022 | |||||||
Allowance for Credit Losses | |||||||||
Beginning Allowance for Credit Losses | $ | 197.5 | $ | 213.0 | $ | 199.9 | (7)% | (1)% | |
Provision for (Release of) Credit Losses | 14.0 | (15.5) | 0.5 | N/M | N/M | ||||
Net Recoveries (Charge-Offs) | 0.3 | - | (4.5) | N/M | (106) | ||||
Ending Allowance for Credit Losses | $ | 211.8 | $ | 197.5 | $ | 195.9 | 7 % | 8 % | |
Allowance assigned to: | |||||||||
Loans and Leases | $ | 166.8 | $ | 152.5 | $ | 138.7 | 9 % | 20 % | |
Undrawn Loan Commitments and | 28.3 | 26.0 | 40.7 | 9 | (30) | ||||
Standby Letters of Credit | |||||||||
Debt Securities and Other Financial Assets | 16.7 | 19.0 | 16.5 | (12) | 1 | ||||
Ending Allowance for Credit Losses | $ | 211.8 | $ | 197.5 | $ | 195.9 | 7 % | 8 % |
N/M - Not meaningful
Q3 2023
The provision in the current quarter was primarily due to an increase in the reserve evaluated on a collective basis, driven by a small number of large new loans and renewals and credit quality deterioration of certain commercial real estate (CRE) and commercial and institutional (C&I) loans, partially offset by a net improvement in the overall macroeconomic outlook. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
Q2 2023
The release of credit reserves in the prior quarter was primarily due to a decrease in the reserve evaluated on a collective basis, driven by improved credit quality in certain C&I and certain CRE loans, partially offset by expectations for higher economic stress at the time in the CRE market, particularly Office CRE.
Q3 2022
The provision in the prior-year quarter was primarily due to an increase in the collective basis reserve, driven by a weaker macroeconomic outlook at the time, partially offset by improvements in credit quality mainly within the C&I portfolio.
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NORTHERN TRUST CORPORATION THIRD QUARTER 2023 RESULTS
NONINTEREST EXPENSE
% Change Q3 2023 vs. | |||||||||
($ In Millions) | Q3 2023 | Q2 2023 | Q3 2022 | Q2 2023 | Q3 2022 | ||||
Noninterest Expense | |||||||||
Compensation | $ | 558.1 | $ | 604.5 | $ | 553.3 | (8)% | 1 % | |
Employee Benefits | 100.8 | 101.4 | 109.9 | (1) | (8) | ||||
Outside Services | 229.6 | 230.9 | 220.9 | (1) | 4 | ||||
Equipment and Software | 232.5 | 229.3 | 212.4 | 1 | 9 | ||||
Occupancy | 58.7 | 53.8 | 51.3 | 9 | 14 | ||||
Other Operating Expense | 98.5 | 112.0 | 82.0 | (12) | 20 | ||||
Total Noninterest Expense | $ | 1,278.2 | $ | 1,331.9 | $ | 1,229.8 | (4)% | 4 % | |
End of Period Full-Time Equivalent Staff | 23,300 | 23,500 | 23,100 | (1)% | 1 % |
Compensation expense decreased sequentially primarily due to $36.7 million of severance-related charges in the prior quarter, lower incentives and lower full-time equivalent employees. Compensation expense increased compared to the prior-year quarter primarily due to higher salary expense and unfavorable currency translation, partially offset by lower incentives.
Employee benefits expense decreased compared to the prior-year quarter primarily due to a $17.0 million pension settlement charge in the prior-year quarter, partially offset by smaller increases across various other benefit-related expense lines.
Outside services expense increased compared to the prior-year quarter primarily due to higher technical services and legal services, partially offset by lower consulting services.
Equipment and software expense increased sequentially and from the prior-year quarter primarily due to higher software amortization and higher software costs, partially offset by a nonrecurring $4.1 million credit associated with computer maintenance and rental expense.
Occupancy expense increased sequentially and from the prior-year quarter primarily due to a $3.0 million charge related to early lease exits.
Other operating expense decreased sequentially primarily due to a $25.6 million charge related to the write-off of an investment in a client capability in the prior quarter, partially offset by higher account servicing activities. Other operating expense increased compared to the prior-year quarter primarily due to higher supplemental compensation plan expense, higher account servicing activities, and an increase to the annual Federal Deposit Insurance Corporation assessment rate.
PROVISION FOR INCOME TAX
% Change Q3 2023 vs. | |||||||||||
($ In Millions) | Q3 2023 | Q2 2023 | Q3 2022 | Q2 2023 | Q3 2022 | ||||||
Net Income | |||||||||||
Income before Income Taxes | $ | 434.3 | $ | 440.7 | $ | 524.5 | (1) | % | (17) | % | |
Provision for Income Taxes | 106.5 | 108.9 | 129.7 | (2) | (18) | ||||||
Net Income | $ | 327.8 | $ | 331.8 | $ | 394.8 | (1) | % | (17) | % | |
Effective Tax Rate | 24.5 % | 24.7 % | 24.7 % | (20)bps | (20)bps |
bps - basis points
The effective tax rate decreased sequentially and from the prior-year quarter primarily due to a lower state tax provision following the resolution of certain state matters.
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Northern Trust Corporation published this content on 18 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 October 2023 11:11:28 UTC.
