Bloomberg News

Northern Trust’s Profit Rises 9.5% as Takeovers Boost Assets

October 19, 2011

(Adds revenue and asset figures in fifth paragraph.)

Oct. 19 (Bloomberg) -- Northern Trust Corp., the third- largest independent U.S. custody bank, said third-quarter profit rose 9.5 percent as acquisitions boosted assets, offsetting market declines and record-low interest rates.

Net income increased to $170.4 million, or 70 cents a share, from $155.6 million, or 64 cents, a year earlier, the Chicago-based company said today in a statement. Excluding certain items, 22 analysts surveyed by Bloomberg estimated average earnings of 69 cents a share.

“The acquisitions they made between now and a year ago helped revenue and could help earnings,” Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, said in an interview before results were announced.

Northern Trust has lagged behind rivals Bank of New York Mellon Corp. and Boston’s State Street Corp. in cutting costs and making acquisitions that can offset the impact of low interest rates, which reduce the returns custody banks earn on investments and from managing money-market funds. The U.S. Federal Reserve has held its benchmark lending rate at zero to 0.25 percent since December 2008 in an attempt to stimulate lending and economic growth.

Revenue rose 9 percent to $971.5 million, driven by a 7 percent jump in custody fees as the assets Northern Trust oversees increased 7 percent to $4.17 trillion. The amount of money the company manages for investors dropped 2 percent to $644 million. Non-interest expenses climbed 13 percent to $701 million as compensation rose 14 percent.

Fees Waived

Fee waivers by money-market mutual funds more than doubled from a year earlier to $29.1 million in the three months ended Sept. 30. Money funds, faced with low yields and a shrunken supply of available securities, have been forced to cut fees to keep customer returns above zero.

The company made three takeovers in the past year, including the purchase of Bank of Ireland Plc’s securities- servicing unit in June for 60 million euro ($82.4 million), and the $100 million acquisition of Chicago-based hedge-fund asset servicer Omnium LLC from Citadel LLC in July. The purchases helped soften the impact of the 8 percent decline in the MSCI AC World Index of global stocks in the year ended Sept. 30.

“New business, across the company, was excellent,” Chairman and Chief Executive Officer Frederick H. Waddell said in the statement.

BNY Mellon

BNY Mellon, the largest custodian, said today its third- quarter net income rose 4.7 percent to $651 million. Boston’s State Street said yesterday third-quarter net income on an operating basis rose 11 percent to $476 million.

Results for Northern Trust were announced before the start of regular U.S. trading. The shares declined 30 percent this year through yesterday, while the 19-company Standard & Poor’s index of asset managers and custody banks fell 24 percent.

Custody banks keep records, track performance and lend securities for institutional investors, including mutual funds, pension funds and hedge funds. Northern Trust also manages investments for individuals and institutions.

(Northern Trust is scheduled to hold a conference call for investors at noon New York time. The call can be accessed at www.northerntrust/financialreleases.)

--Editors: Steven Crabill, Larry Edelman

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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