Northern Trust Corp. (NTRS:US), the third-biggest independent U.S. custody bank, said fourth-quarter profit rose 1.1 percent as equity markets lifted the assets it oversees and the fees it collects.
Net income increased to $167 million, or 70 cents a share, from $165.2 million, or 69 cents, a year earlier, the Chicago-based company said today in a statement. Analysts had expected profit of 75 cents a share, according to the average of 13 estimates (NTRS:US) collected by Bloomberg. Earnings were reduced by 5 cents a share because of an after-tax charge to resolve long-standing litigation.
“I think 2014 will be the inflection point for the trust banks when we’ll see a significant pop out of revenue because of increased economic activity and rising valuations,” Marty Mosby, an analyst with Guggenheim Securities LLC in Hernando, Mississippi, said in a telephone interview before the results were announced.
Northern Trust has benefited as global equity markets, led by the U.S., rose for the second straight year in 2013. About half the money the company invests or safeguards for clients is in stocks. The Standard & Poor’s 500 Index of U.S. stocks climbed 30 percent last year, the most since 1997, helping to overcome the negative impact of low interest rates on earnings.
Low interest rates hurt custody banks by reducing the returns they make on lending and on their own investments. The U.S. Federal Reserve has held its benchmark interest rate at zero to 0.25 percent since December 2008 in an attempt to stimulate borrowing and economic growth.
Bank of (BK:US)New York Mellon Corp., the world’s largest custody bank, said Jan. 17 that its fourth-quarter earnings fell 18 percent after it reported a $115 million investment loss. Net income declined to $513 million, the New York-based bank said.
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.
Results were announced before the start of regular U.S. trading. Northern Trust gained 21 percent in the year ended yesterday, compared with the 34 percent advance by the Standard & Poor’s 20-company index of asset managers and custody banks.
(Northern Trust is scheduled to hold a conference call for investors at noon New York time. The call can be accessed at www.northerntrust.com/financialreleases.)
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