Northern Trust Corporation (NTRS) down 3.1% since last earnings report: can it bounce back?

A months have passed since the last earnings report of the Northern Trust Corporation (NTRS). Stocks lost around 3.1% over that time frame, underperforming the S&P 500.

Will the recent negative trend continue until its next results release, or is Northern Trust Corporation expected to have a breakthrough? Before we dive into how investors and analysts have reacted in recent times, let’s take a quick look at his latest earnings report to better understand the important catalysts.

Northern Trust Third Quarter Profits and Revenue Peak, Costs Rise

Northern Trust reported third quarter 2021 earnings per share of $ 1.80, beating Zacks’ consensus estimate of $ 1.67 on releasing credit reserves. Net income increased $ 1.32 year over year.

The results were positively impacted by an increase in NII and commission income. An increase in AUC and AUM were the determining factors. The release of the credit reserve was a tailwind. However, the shrinking margins and rising operating expenses were major drag.

Net income for the quarter was $ 395.7 million, up 34% year-on-year.

Income goes up, costs go up

On a fully taxable equivalent basis, total income of $ 1.63 billion increased 10% year over year. The top line broke Zacks’ consensus estimate by $ 1.61 billion.

Third-quarter NII of $ 357.1 million edged up 1.8% year-over-year, mainly due to an increase in average earning assets to some extent.

The NIM stood at 0.98%, down 5 basis points from the previous year quarter. This decrease mainly reflects the fall in average interest rates, partially offset by a favorable balance sheet volume and mix-shift.

Non-interest income improved slightly from the prior year quarter to $ 1.29 billion. Trust, investment and other management fees totaled $ 1.11 billion, up 11% year-over-year.

Non-interest expense edged up year over year to $ 1.13 billion in the third quarter. This recovery is mainly the result of an increase in all components other than other operating expenses.

AUM and AUC increase

As of September 30, 2021, Northern Trust’s total AUA climbed 21% year-on-year to $ 12.3 trillion, while total AUM rose 17% to $ 1.53 trillion.

Credit grade: a mixed bag

Credit measures during the quarter ended in September showed a mixed trend. The company released $ 13 million in credit loss reserves in the third quarter compared to $ 0.5 million in provisions reported in the prior year quarter. Net recoveries were $ 1.1 million compared to $ 0.4 million reported in the same quarter last year. The total allowance for credit losses was $ 195.1 million, down 27% year over year.

However, total unrecognized assets increased 43% to $ 141.2 million as of September 30, 2021.

Mixed capital position

Under the advanced approach, as of September 30, 2021, the Common Equity Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 13%, 15.4% and 7, 1%, compared to 13.9%, 16.7% and 7.7%, respectively. , evidenced by the quarter of the previous year. All ratios exceeded regulatory requirements.

The average return on common equity was 13.7%, compared to 10.5% in the previous year quarter. The return on average assets was 1% compared to the 0.83% observed in the quarter of the previous year.

Fixed asset deployment activities

During the quarter, the company returned $ 248 million to shareholders through share buybacks and dividends. The company repurchased $ 100 million of common stock as part of its share buyback program.

How have the estimates evolved since?

It turns out that revised estimates have trended upward over the past month.

VGM scores

Currently, Northern Trust Corporation has a low Growth Score of F, but its Momentum Score is doing much better with a B. However, the stock received a D rating on the value side, which the place in the bottom 40%. for this investment strategy.

Overall, the stock has an overall VGM score of F. If you’re not strategy-focused, this score is the one you should be interested in.

Outlook

Estimates are broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Northern Trust Corporation has a Zacks Rank # 3 (Hold). We expect the stock to come back online in the coming months.

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