Northern Trust Q3 Earnings Beat on Higher Fee Income, Costs Rise

Core Viewpoint - Northern Trust Corporation (NTRS) reported strong third-quarter 2024 results, with adjusted earnings per share of $1.96, exceeding the Zacks Consensus Estimate of $1.73, and a significant increase from $1.49 in the prior-year quarter [1] Financial Performance - Total revenues (GAAP basis) for the quarter reached $1.97 billion, marking a 19.5% year-over-year increase and surpassing the Zacks Consensus Estimate of $1.87 billion [2] - Net interest income (NII) was $569.4 million, up 23.1% year over year, with a net interest margin (NIM) of 1.68%, an increase of 23 basis points from the prior-year quarter [2] - Trust, investment, and other servicing fees totaled $1.2 billion, reflecting a 7.6% increase from the year-ago quarter [2] - Other non-interest income rose 32.6% to $209.6 million, primarily due to a $68.1 million pre-tax gain from the sale of an equity investment [2] - Non-interest expenses increased by 6.4% to $1.36 billion, driven by higher costs across all components except for occupancy and other operating expenses [2] Asset Management - As of September 30, 2024, total assets under custody (AUC) increased by 25.2% year over year to $13.8 trillion, while total assets under management (AUM) rose 21.6% to $1.62 trillion [3] Credit Quality - The total allowance for credit losses was $220 million, up 5% year over year, while total non-accrual assets decreased by 43.1% to $39.3 million [4] - Provisions for credit losses were reported at $8 million, down 42.9% from the prior-year quarter [4] Capital and Profitability Ratios - The Common Equity Tier 1 capital ratio improved to 12.6% from 11.4% in the prior-year quarter, and the total capital ratio increased to 15.6% from 14.5% [5] - The Tier 1 leverage ratio was 8.1%, compared to 7.9% in the prior-year quarter [5] - Return on average assets was 1.26%, up from 0.93% in the year-ago quarter, and return on average common equity was 15.4%, compared to 11.6% in the prior-year quarter [5] Capital Distribution - Northern Trust returned approximately $453 million to shareholders through share repurchases and dividends during the reported quarter [6] Market Outlook - The surge in fee income and increasing AUC and AUM balances are expected to support the company's financials, although rising expenses may impact profitability in the near term [7]