on Wednesday continued the strong results by trust banks, posting a rise in second-quarter profits.
The Chicago-based bank recorded earnings per share of 96 cents, vs. 92 cents for last year's second quarter. While the results missed the $1.05-a-share expectation of analysts polled by Thomson Reuters, profit growth in the bleak current environment is a welcome sign for investors.
Across the board, fees and revenue income increased and while Northern Trust's loan loss provision increased too, it was only a modest amount. Northern Trust also decided not to fight the Internal Revenue Service with regards to lease transactions, which caused the bank to take some charges for the quarter as well.
Consolidated revenues jumped 24% to $1.09 billion with net income coming in at $215.6 million, topping last year's $206.9 million. This included the accounting charges of $87.3 million or 39 cents per share.
"Northern Trust reported very strong core results in the second quarter -- including 24% revenue growth -- against the continued backdrop of challenging market conditions," CEO Frederick Waddell said in a company statement. "Our revenue growth was driven by trust, investment and other servicing fees; foreign exchange trading income; and net interest income."
Foreign exchange trading contributed a record $126.6 million, jumping 56% over last year's figure of $45.6 million. Trust fees jumped 32% and securities lending fees climbed 104% to a record $149.9 million. Securities commissions turned in a healthy 36% increase to $20.4 million.
The black eye on the quarter was accepting the reality that fighting the IRS was probably not the best idea. The bank reviewed the other lease transaction cases in the courts and most were ruled in favor of the IRS, prompting it to go back to the books and record a $29.4 million charge against interest income. The bank increased its provision for income taxes by $57.9 million.
Stuart Plesser, an analyst with Standard & Poor's, has a buy rating and an $88 price target for the stock. "We believe the company's leading position in the affluent market, and its focus on ultra-wealthy clients, should result in above peers average revenue and earnings growth in a stable or modestly rising equity market," he wrote.
Northern Trust has definitely held its own in the weak market for financial stocks. It has lost only 1% in value over the last 12 months, compared to the S&P 500, which is down 21% for the year, and the
SPDR Financial ETF
, which is down 42% for the year. The trust banks have been turning in solid second quarters like
strong results reported on Monday.
Bank of New York Mellon
is expected to report its numbers on Thursday. The trust banks have
from steady fee business and low exposure to troubled loans.
Northern Trust was rising 6.3% to $71.41 in recent trading.