Bank Stocks Wrap: Northern Trust Leads on Wednesday

NEW YORK (TheStreet) -- Northern Trust (NTRS) was the winner among large U.S. banks on Wednesday, with shares rising 3.3% to $62.66.

The broad indices ended mixed, as companies continued to report mixed fourth-quarter results.  No major economic U.S. economic reports were released on Wednesday.  The International Monetary Fund late on Tuesday said it expected economic growth to accelerate from an annual pace of 3.0% during 2013 to 3.7 this year and 3.9% in 2015.

The KBW Bank Index (I:BKX)  rose 0.4% to 71.40, with all but five of the 24 stocks making up the index ending with gains. 

Shares of Regions Financial (RF) were up 1.5% to 11.02, adding to Tuesday's 1% gain.  The Birmingham, Ala., lender on Tuesday announced its fourth-quarter results, which included a number of extraordinary items at the end of what CEO Grayson Hall called a "foundational year" for the bank.  Out of 31 sell-side analysts polled by Thomson Reuters, 18 rate Regions a "buy," while 11 analysts have neutral ratings and just two analysts rate the shares "underperform" or "sell."

Among the believers are BMO Capital Markets analysts Peter Winter and Lana Chan, who on Tuesday reiterated their "outperform" rating for Regions, with a price target of $12, which they wrote in a notes to clients was based on "13.0x our 2015 EPS estimate plus the impact of a 100-bp increase in interest rates, both on a discounted basis."

BMO Capital Markets estimates Regions will earn 87 cents a share during 2014, with EPS rising to 92 cents in 2015.

Northern Trust

Northern Trust of Chicago on Wednesday reported fourth-quarter earnings allocated to common shareholders of $167.0 million, or 70 cents a share, declining from $203 million, or 85 cents a share, in the third quarter, and rising from $165.2 million, or 69 cents a share, during the fourth quarter of 2012.  The fourth-quarter results were lowered by $11.9 million after tax, or five cents a share, "in connection with an agreement to resolve certain long-standing class action litigation," the company said.  The third-quarter results were boosted by an after-tax gain of $20.3 million, or eight cents a share, from the sale of an office building.

For all of 2013, net income allocated to common shareholders grew to $719.4 million, or $2.99 a share, from $677.3 million, or $2.81 a share, the previous year.

The bank grew its assets under custody 6% sequentially and 16% year-over-year to $5.576 trillion as of Dec. 31, reflecting in part the strong stock market during 2013.  Assets under management were up 5% quarter-over-quarter and 17% year-over-year, to $884.5 billion as of Dec. 31.

Trust, investment and services fees rose 4% from the third quarter and 8% from a year earlier to $673.8 million during the fourth quarter.

Jefferies analyst Ken Usdin rates Northern Trust a "hold," with a price target of $64.  In a note to clients on Tuesday, Usdin wrote that "Higher expenses were again a burden, along with weak FX trading, while core fees (especially custody) looked good.  The bank's net interest income "benefited from a much larger balance sheet, led by deposit growth," he added.

Northen Trust's shares trade for 16.2 times the consensus 2015 EPS estimate of $3.87.  The consensus 2014 EPS estimate is $3.43.

The following table shows the performance of Northern Trust's stock against the KBW Bank Index  and the S&P 500 since the end of 2011:

NTRS Chart data by YCharts


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-- Written by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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