July 17, 2013 / 9:10 PM / 5 years ago

Fitch: Higher Equity Markets Aid Northern Trust's Earnings

(The following statement was released by the rating agency) CHICAGO, July 17 (Fitch) Fitch Ratings notes that Northern Trust Corporation (NTRS) reported earnings through the first six months of 2013 of $355.1 million, up from $340.8 million in the same period in the prior year. This represented a 4% increase in overall earnings was aided by higher equity markets through the first part of the year. This equates to a 9.43% return on average common equity (ROE), which is satisfactory but remains below NTRS' long-term historical averages. Higher equity markets helped boost fees from trust, investment, and other servicing fees through the first six months of 2013 relative to the prior year period and higher foreign exchange volatility drove an increase trading volumes. Offsetting the improvement in fees was continued reduction in net interest income as the protracted low interest rate environment continues to cause net interest margin (NIM). NTRS continues to prudently keep the duration of its investment portfolio short, but also continues to endure the impact of lower reinvestment rates on its earnings. Given NTRS' continued focus on expense management, it was able to keep its total expenses relatively flat through the first six months of the year relative to the prior year period, with only a 1% increase in overall expenses. This continued expense discipline has kept NTRS' earnings relatively level despite the challenging interest rate and revenue environment. Total assets under custody (AUC) amount to $4.99 trillion, down slightly from March 31, 2013, but up 9% from June 30, 2012. Similarly, total assets under management (AUM) amount to $803 billion, down slightly from March 31, 2013 but up 14% from June 30, 2012 due in larger part to higher markets over the course of the last year. NTRS' credit quality remained good as non-performing assets (NPAs) were 0.93% of total loans and leases as of June 30, 2013, but this was an increase from 0.87% of total loans and leases at March 31, 2013. Approximately two-thirds of NPAs were related to residential real estate loans, while one-third of NPAs was related to commercial real estate loans. NTRS' net charge offs (NCOs) on an absolute basis increased, but remained very manageable 0.11% of loans. Fitch notes that NTRS' capital position remains strong despite some balance sheet growth, continued dividend payments, and some modest share buybacks. As of June 30, 2013 NTRS' Tier 1 common ratio was 12.6%, down from 12.8% at March 31, 2013, but up from 12.4% at June 30, 2012. Fitch notes that this strong capital position remains a significant rating strength for the company. Contact: Justin Fuller, CFA Director +1-312-368-2057 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Christopher Wolfe Managing Director +1-212-908-1771 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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