Northern Trust(US:NTRS)2021-07-27 20:42Financial Performance - Net income increased by 18% to $368.1 million for the quarter, compared to $313.3 million in the prior year[17]. - Total revenue rose by 5% to $1.58 billion, up from $1.51 billion in the same quarter last year[18]. - The annualized return on average common equity improved to 13.7% from 12.2% year-over-year[17]. - Net Income increased by $69.3 million, or 10%, to $743.2 million, with diluted earnings per share rising to $3.42 from $3.02[73]. - For the quarter ended June 30, 2021, Net Income for Corporate & Institutional Services increased by $18.4 million, or 13%, compared to the prior-year quarter[118]. - For the six months ended June 30, 2021, Net Income for Corporate & Institutional Services decreased, primarily due to higher Noninterest Expense and lower Net Interest Income, despite higher Trust, Investment and Other Servicing Fees[119]. - For the quarter ended June 30, 2021, Net Income for Wealth Management increased by $43.4 million, or 24%, primarily due to higher Trust, Investment and Other Servicing Fees and a release of credit reserves[129]. Revenue Sources - Trust, Investment and Other Servicing Fees increased by 12% to $1.08 billion, driven by favorable markets and new business[18]. - Total C&IS Trust, Investment and Other Servicing Fees increased by 8% to $611.5 million in Q2 2021 from $566.2 million in Q2 2020, driven by a 21% increase in Custody and Fund Administration fees[26]. - Wealth Management Trust, Investment and Other Servicing Fees rose by 17% to $463.9 million in Q2 2021 compared to $395.3 million in Q2 2020, with notable increases across all regions[26]. - Total Other Noninterest Income remained stable at $348.9 million, with a slight increase of 0.4% compared to $348.5 million in 2020[86]. - Total Noninterest Income for Corporate & Institutional Services for the six months ended June 30, 2021, was $1,503.6 million, an increase of $98.8 million, or 7%, from the prior-year period[119]. Expenses - Noninterest expense rose by 8% to $1.12 billion, attributed to higher employee benefits and compensation expenses[22]. - Noninterest Expense increased by $83.9 million, or 8%, totaling $1.12 billion, primarily due to higher compensation and employee benefits[68]. - Total Noninterest Expense increased by $135.8 million, or 6%, to $2,238.3 million, primarily due to higher compensation and employee benefits expenses[103]. - For the quarter ended June 30, 2021, Noninterest Expense for Corporate & Institutional Services increased by $48.0 million, or 7%, primarily due to higher expense allocations and compensation expenses[126]. Interest Income and Margin - Net interest income decreased by 10% to $335.6 million, primarily due to a lower net interest margin[20]. - Net Interest Income (FTE) decreased by $35.9 million, or 41.6%, primarily due to lower average interest rates and a decrease in net interest margin[57]. - The net interest margin (FTE adjusted) was 0.97%, down from 1.22% year-over-year, indicating a decline in profitability from interest-earning assets[53]. - Net Interest Income for Corporate & Institutional Services decreased by $12.3 million, or 7%, for the quarter ended June 30, 2021, and by $62.9 million, or 17%, for the six months ended June 30, 2021[123]. Assets and Investments - Total assets increased by 1% to $172.3 billion as of June 30, 2021[9]. - Assets under custody/administration grew by 8% to $15.73 billion[9]. - Total Assets Under Custody/Administration reached $15,727.1 billion, a 30% increase year-over-year from $12,098.3 billion[35]. - Total Assets Under Management increased by 22% to $1,539.4 billion in Q2 2021 from $1,257.8 billion in Q2 2020, reflecting favorable markets and net inflows[41]. - The ending balance of Assets Under Management (AUM) increased to $1,539.4 billion as of June 30, 2021, up from $1,449.1 billion at the end of the previous quarter, representing a growth of 6.2%[46]. Credit and Reserves - A release of credit reserves of $27.0 million occurred, compared to a provision of $66.0 million in the prior year[21]. - The provision for credit losses released $27.0 million in the current quarter, compared to a provision of $66.0 million in the prior-year quarter[64]. - The allowance for credit losses was maintained at a ratio of 1.4 times the nonaccrual loans and leases as of June 30, 2021[162]. - The total allowance for credit losses was $195.3 million, down from $251.8 million as of December 31, 2020, reflecting a decrease of approximately 22.4%[170]. Market Performance - The S&P 500 index increased by 43% year-over-year, impacting the Corporation's results positively[32]. - Market performance contributed $78.2 billion to the AUM, with a notable increase from $31.5 billion in the previous quarter[46]. - The company experienced a significant increase in cash and other assets inflows, totaling $197.2 billion for the quarter, compared to $165.6 billion in the previous quarter[46]. Taxation - The Provision for Income Taxes in the current quarter totaled $118.4 million, with an effective tax rate of 24.3%, up from $89.9 million and 22.3% in the prior-year quarter[23]. - The effective tax rate increased to 24.3% from 22.3%, primarily due to the deferred tax impact of the UK statutory tax rate increase[72]. - Income tax expense for the six months ended June 30, 2021, was $239.2 million, with an effective tax rate of 24.3%, compared to 22.0% in the prior-year period[108]. Shareholder Returns - The company declared cash dividends totaling $148.1 million to common stockholders for the three months ended June 30, 2021[143]. - The company repurchased 252,304 shares of common stock at a total cost of $30.2 million during the three months ended June 30, 2021, with an average price of $119.59 per share[145]. Regulatory Capital - The Common Equity Tier 1 Capital ratio for Northern Trust Corporation was 12.0% as of June 30, 2021, consistent with the 12.0% reported on March 31, 2021, and above the minimum requirement of 4.5%[183]. - The Total Capital ratio for Northern Trust Corporation was 14.5% as of June 30, 2021, remaining stable compared to 14.5% on March 31, 2021, and exceeding the minimum requirement of 8.0%[183]. Risk Management - Northern Trust's market risk management includes measuring daily the risk of loss associated with non-U.S. currency positions using a Value-at-Risk (VaR) model[190]. - The total regulatory Value-at-Risk (VaR) for global foreign currency, as of June 30, 2021, shows an average of $0.1 million for FX and IR drivers combined[32]. - The reconciliation to fully taxable equivalent (FTE) shows that net interest income on a GAAP basis for the three months ended June 30, 2021, was $335.6 million, while the FTE-adjusted net interest income was $343.9 million[204].