Northern Trust Q1 Earnings Top Estimates on Higher NII & Fee Income

Core Viewpoint - Northern Trust Corporation (NTRS) reported strong first-quarter 2025 adjusted earnings per share (EPS) of $1.90, exceeding the Zacks Consensus Estimate of$ 1.85, and up from $1.70 in the prior-year quarter [1][2] Financial Performance - NTRS's net income on a GAAP basis was$ 392 million, reflecting an 82.5% increase from the prior-year quarter [2] - Total revenues on a GAAP basis reached $1.94 billion, a 17.6% year-over-year increase, although it slightly missed the Zacks Consensus Estimate by 0.3% [3] - Net interest income (NII) was$ 573.7 million, up 7% year over year, with a net interest margin of 1.69%, an increase of 8 basis points from the prior-year quarter [3] - Trust, investment, and other servicing fees totaled $1.21 billion, marking a 6% year-over-year increase [3] Non-Interest Income and Expenses - Other non-interest income was$ 158.1 million, a significant recovery from a loss of $24.2 million in the year-ago quarter, driven by increases in all components except for other operating income [4] - Non-interest expenses rose 4% to$ 1.42 billion, primarily due to increases in compensation, employee benefits, and equipment and software expenses [4] Assets Under Custody and Management - As of March 31, 2025, total assets under custody (AUC) increased 4% year over year to $13.3 trillion, while total assets under management (AUM) rose 7% to$ 1.6 trillion [5] Credit Quality - The total allowance for credit losses was $207.3 million, up 3% year over year, with total non-accrual assets increasing to$ 73.1 million from $37 million in the prior-year period [6] - Provisions for credit losses were reported at$ 1 million in the first quarter, compared to a negative provision of $8.5 million in the year-ago quarter [6] Capital and Profitability Ratios - The Common Equity Tier 1 capital ratio improved to 12.9% from 11.4% in the prior-year quarter, while the total capital ratio rose to 15.7% from 14.2% [7] - The Tier 1 leverage ratio increased to 8% from 7.8%, and the return on average common equity was 13%, compared to 7.3% in the year-earlier quarter [7] Capital Distribution - In the reported quarter, Northern Trust returned$ 435.4 million to shareholders through share repurchases and dividends [8] Overall Assessment - The rise in fee income and NII contributed positively to the company's performance, with increasing AUC and AUM likely to support future financials. However, concerns remain regarding weakening asset quality and rising expenses [9][10]