Northern Trust CompanyNTRS third-quarter 2021 results, due for release Oct. 20, are expected to reflect year-over-year revenue and profit growth.
In the past quarter, the company’s earnings beat Zacks’ consensus estimate for the release of credit reserves. Results were positively impacted by an increase in trust, investment and other service fees. The increase in assets under custody and assets under management also played a driving role. However, the decline in net interest income (NII) on margin contraction was negative. The increase in operating expenses was a major drag.
Northern Trust uses a lag effect to calculate its custodial and investment management fees, ie the calculations are based on the previous quarter end valuations. Given that stock market performance was impressive in the second quarter, the company may have recorded gains in custody, service and management fees in the third quarter.
Notably, Northern Trust has had a surprise history of mixed earnings. It beat estimates in two of the last four quarters for as many misfires, generating a 1.37% earnings surprise on average.
Northern Trust Corporation Award and EPS Surprise
Northern Trust Corporation price-eps-surprise | Quote from the Northern Trust Company
Ahead of the release of third quarter results, the company is seeing a downward revision in estimates, indicating bearish sentiments among analysts. The earnings estimate for the current quarter has moved slightly south over the past 30 days. Still, Zacks’ consensus estimate for third-quarter earnings is pegged at $1.67 per share, suggesting a 26.5% increase from the figure reported a year ago. Additionally, the consensus revenue estimate of $1.61 billion indicates an increase of 8.4%.
Here are the other factors that may have influenced the company’s quarterly performance:
Net interest income: According to the latest data from the Fed, the overall lending scenario has been weak in the July-September period, with low net worth in housing and commercial and industrial loans. Conversely, the real estate, commercial real estate and consumer loans portfolios should have offered support.
The steepening of the yield curve (the difference between short-term and long-term interest rates) likely supported the bank’s net interest margin. Although the 10-year US Treasury yield of 1.49% at the end of September was relatively flat on a sequential basis, the figure rose 57 basis points from 0.92% at the end of September. 2020. So the NII will likely get some support.
Excess liquidity, low loan yields and low reinvestment rates on securities may have put downward pressure on asset returns. However, the low filing costs should have been the compensating factor.
Zacks consensus estimate for average interest-earning assets of $142.9 million for the quarter indicates a 10.5% year-over-year improvement, while the NII is expected to rise 2 .7% to $338 million.
Fee receipts: Notably, the company provides the majority of its asset management services through the Corporate and Institutional Services unit, which generates more than 50% of total revenue. An increase in revenue in this segment should have provided some support to Northern Trust’s overall revenue in the reporting quarter. According to the Zacks consensus estimate, C&I segment trust, investment and other services fees will likely rise 9.1% year-over-year to $638 million.
Additionally, Zacks’ consensus estimate for security fees and trading revenue as well as cash management fees, at $31.5 million and $12 million, respectively, is expected to have increased by 21%. and 3.5%, respectively, on an annual basis. .
Spending under control: Northern Trust’s expenses in the quarter are expected to have been contained, thanks to its ongoing cost reduction initiatives.
Let’s see what our quantitative model predicts:
Northern Trust lacks the right combination of two key ingredients – a positive ESP on income and Zacks rank #3 (Hold) or higher – to increase the odds of beating income.
You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
ESP Earnings: Earnings ESP for Northern Trust is 0.00%.
Zacks Rank: Northern Trust currently carries a Zacks rank of 3.
Banks worth visiting
Here are a few bank stocks you might want to consider as they have the right combination of elements to post the beat earnings in their next releases, according to our model.
Zions Bancorporation ZION is expected to release its quarterly results on October 18. The company has an earnings ESP of +2.49% and currently carries a Zacks ranking of 3. You can see the full list of Zacks #1 (Strong Buy) stocks today here.
Fifth Third Bancorp FITB is expected to release its quarterly results on October 19. The company, which currently has a Zacks rating of 2 (buy), has an ESP profit of +0.46%.
BankUnited, Inc. BKU is expected to release its third quarter results on October 21. The company currently has a #3 Zacks ranking and +1.90% ESP earnings.
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