3. Northern Trust
of Chicago closed at $48.64 Monday, returning 25% year-to-date, following last year's 27% decline.
The shares trade for 1.8 times tangible book value, and for 14.5 times the consensus 2013 EPS estimate of $3.35. The consensus 2012 EPS estimate is $2.94.
Based on a quarterly payout of 30 cents, the shares have a dividend yield of 2.47%.
Northern Trust reported second-quarter net income of $179.6 million, or 73 cents a share, increasing from $161.2 million, or 66 cents a share in the first quarter, and $152 million, or 62 cents a share, during the second quarter of 2011.
The company's second-quarter ROA was 0.78%, increasing from 0.68% the previous quarter, and 0.66% a year earlier. The return on average equity was 9.91% during the second quarter, increasing from 9.04% in the first quarter, and 8.76% in the second quarter of 2011.
Northern Trust's second-quarter net interest income accounted for 26% of total revenue. The second-quarter net interest margin was 1.28%, increasing from 1.24% the previous quarter, and 1.23% a year earlier. Mosby estimates that Northern Trust's net interest margin will decline by eight basis points through the end of 2013.
Mosby rates Northern Trust a "Buy," and on Monday raised his price target for the shares by two dollars to $59, "due to the recent acceleration in efficiency gains." The analyst said that "NTRS has one of the strongest capital positions in our coverage, high long-term returns on capital, and a proven risk avoidance strategy," which has "historically created a good, low-risk long-term investment."
The analyst went on to say that "NTRS has over $20 billion in short-term investments, which could be deployed to earn at least 2% more in yield, or add roughly $1 in annualized earnings per share power," although "like the other trust banks, NTRS is exposed to changes in market valuations and revenue margins, which would be significantly unfavorably impacted by a near-term recession."
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