Northern Trust Corp. (NTRS) filed Quarterly Report for the period ended 2009-09-30.
Northern Trust Corp. is a multi-bank holding company with worldwide locations and is a provider of treasury management master trust custody retirement risk and performance international and investment management services for corporations large institutions and individuals. Northern Trust has earned distinction as a leading provider of personal fiduciary asset management personal and private banking and master trust/custody global custody and treasury management services. Northern Trust Corp. has a market cap of $12.39 billion; its shares were traded at around $51.31 with a P/E ratio of 14.1 and P/S ratio of 2.9. The dividend yield of Northern Trust Corp. stocks is 2.2%. Northern Trust Corp. had an annual average earning growth of 6.9% over the past 10 years. GuruFocus rated Northern Trust Corp. the business predictability rank of 2.5-star.
Highlight of Business Operations:
Net income totaled $187.9 million on a reported basis compared with a reported net loss of $148.3 million in the third quarter of last year. Reported net income per common share on a diluted basis for the third quarter was $.77 compared with a net loss per common share of $.66 reported in the third quarter of 2008. The prior year quarter’s results were negatively impacted by client support related charges totaling $561.5 million ($353.2 million after tax or $1.59 per common share). Operating earnings were $176.7 million, or $.72 per common share, compared with an operating loss of $129.4 million, or $.58 per common share, in the third quarter of last year. Operating results exclude a current quarter $17.8 million pre-tax benefit from the reduction of an indemnification liability related to Visa, Inc. (Visa), consistent with the current quarter’s increased funding by Visa of its litigation related escrow account, and a prior year $30.0 million pre-tax charge relating to Visa indemnifications.
Consolidated revenues stated on a fully taxable equivalent (FTE) basis totaled $927.6 million, down $10.9 million or 1% from last year’s third quarter revenues of $938.5 million. Trust, investment and other servicing fees increased 10% from last year to $523.1 million. Foreign exchange trading income decreased $48.9 million or 34% to $92.9 million from $141.8 million in the prior year. Net interest income on an FTE basis totaled $248.2 million, a decrease of 7%. Noninterest expenses on an operating basis exclude the current quarter’s $17.8 million pre-tax benefit from the reduction of the Visa related
Trust, investment and other servicing fees from C&IS increased 27% from the year-ago quarter to $310.2 million, primarily reflecting higher securities lending revenues, partially offset by the impact of lower market valuations on fees. The largest component of C&IS fees is custody and fund administration fees, which decreased 9% to $150.4 million, driven primarily by lower market valuations as compared to the prior year quarter and the adverse impact of currency translation. Securities lending revenues totaled $82.0 million compared with a negative $4.6 million in the third quarter of last year. The current quarter increase was mainly due to a positive mark-to-market adjustment of approximately $57 million relating to previously unrealized asset valuation losses in a mark-to-market investment fund used in our securities lending activities. The prior year quarter included a negative mark-to-market adjustment of approximately $96 million. Excluding the impact of the mark-to-market adjustments, the current quarter decrease in securities lending fees of approximately $66 million reflects significantly reduced volumes and lower spreads on the investment of cash collateral. Fees from institutional asset management in the quarter totaled $61.0 million, down 11% from the prior year quarter.
Average U.S. loans and leases outstanding during the quarter totaled $27.5 billion, 4% higher than the $26.3 billion in last year’s third quarter. Residential real estate loans averaged $10.8 billion in the quarter, up 10% from the prior year’s third quarter, and represented 38% of the average loan and lease portfolio. Commercial loans averaged $7.3 billion, up 3% from $7.1 billion last year, while personal loans averaged $4.7 billion, up 1% from last year’s third quarter. Loans outside the U.S. decreased $664.2 million on average from the prior year quarter to $743.9 million.
Northern Trust utilizes a diverse mix of funding sources. Total interest-bearing deposits averaged $41.3 billion, down 16% from the third quarter of 2008. Higher levels of U.S. office deposits were more than offset by a $13.2 billion or 34% decline in non-U.S. office deposits from last year’s third quarter. Average domestic retail deposit levels increased $4.7 billion due primarily to higher levels of money market deposit accounts and savings certificates. The decline in non-U.S. office deposits resulted primarily from a decrease in global custody related deposit balances. Other interest-related funds averaged $11.2 billion in the quarter compared with $7.8 billion in last year’s third quarter. The balances within these classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings. The increase in this funding category resulted primarily from higher levels of short term borrowings and senior notes. The increase in senior notes reflects the May 2009 issuance of $500 million of fixed-rate senior notes of the Corporation. Noninterest-related funds utilized to fund earning assets averaged $11.6 billion compared with $8.5 billion in last year’s third quarter, resulting primarily from higher
The provision for credit losses was $60.0 million in the third quarter compared with $25.0 million in the prior year quarter. The current quarter provision reflects the continued weakness in the broader economic environment. The reserve for credit losses at September 30, 2009 was $333.0 million compared with $319.1 million at June 30, 2009 and $207.5 million at September 30, 2008. Net charge-offs totaled $46.1 million for the quarter and included $14.7 million resulting from the sale of two nonperforming loans. Net charge-offs in the prior year quarter totaled $.3 million. For a discussion of the provision and reserve for credit losses, refer to the “Asset Quality” section below.
NTRS is in the portfolios of Private Capital of Private Capital Management, John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Tom Gayner of Markel Gayner Asset Management Corp, Kenneth Fisher of Fisher Asset Management, LLC, John Keeley of Keeley Fund Management, Dodge & Cox.
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