Northern Trust(US:NTRS)2020-10-21 23:04Financial Data and Key Metrics Changes - The company reported third quarter net income of $294.5 million, with earnings per share at $1.32 and a return on average common equity of 10.5% [22] - Year-over-year revenue decreased by 3%, with non-interest income up 3% and net interest income down 21% [24] - Expenses increased by 6%, and net income declined by 23% year-over-year [24][25] - Assets under custody and administration grew to $13.1 trillion, up 13% year-over-year [25] Business Line Data and Key Metrics Changes - In Wealth Management, trust, investment, and other servicing fees were $419 million, up 1% year-over-year and up 6% sequentially [37] - Asset management business saw significant market share gains, managing nearly $100 billion in assets globally under ESG mandates [12] - Corporate and institutional services fees totaled $585 million, up 4% year-over-year [31] Market Data and Key Metrics Changes - The average one-month and three-month LIBOR rates continued to decline during the quarter [23] - The EFA local index remains negative year-over-year, impacting fees unfavorably compared to the prior year [23] Company Strategy and Development Direction - The company is focused on driving efficiencies through technology solutions and growing organically by leveraging existing client relationships [17] - There is an emphasis on enhancing ESG analytics capabilities and launching new client-focused ESG tools [15][16] - The company is exploring opportunities for acquisitions, particularly in the wealth management space, to enhance its client base [102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite the ongoing public health crisis, noting effective adaptation to remote operations [9] - The outlook for net interest income (NII) suggests a potential decline of 1% to 2% per quarter as the securities portfolio continues to reprice [56][57] - Management highlighted a strong pipeline for new business in the corporate and institutional services sector, with expectations for onboarding in the near term [85] Other Important Information - The company declared cash dividends of $0.70 per share, totaling $148 million to common stockholders [49] - A $43.4 million pretax charge related to a corporate action processing error was noted, which impacted net income [22][42] Q&A Session Summary Question: Outlook for NII - Management indicated that 75% of earning assets have been repriced, with expectations for NII to decline by 1% to 2% per quarter moving forward [54][57] Question: Corporate action item clarification - Management explained that the corporate action error was unusual in size but not in occurrence, and corrective measures were taken to address the issue [63][68] Question: Growth in securities line - Management discussed the increase in the securities portfolio, emphasizing a focus on short-term investments to pick up yield without significant risk [71] Question: Organic fee growth expectations - Management noted significant growth in investment management fees and expressed optimism about the pipeline for new business, despite some volatility in the current year [84][89] Question: Capital utilization strategy - Management outlined a framework for capital deployment, considering regulatory requirements, market conditions, and potential acquisition opportunities [98][102] Question: Loan demand trends - Management observed an uptick in loan demand in September, indicating clients are preparing for potential opportunities [118][121]