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Northern Trust Corporation Reports Second Quarter Net Income of $267.9 Million, Earnings Per Common Share of $1.12

CHICAGO--(BUSINESS WIRE)--Northern Trust Corporation today reported second quarter net income per diluted common share of $1.12, compared to $1.10 in the second quarter of 2016 and $1.09 in the first quarter of 2017. Net income was $267.9 million, compared to $263.0 million in the prior-year quarter and $276.1 million in the prior quarter. Return on average common equity was 11.6%.

“Our second quarter results continued to demonstrate our ability to drive strong growth within both our wealth management and institutional businesses. Trust, investment and other servicing fees and net interest income grew 9% and 14%, respectively, compared to the prior year. The growth in fees was driven by strong growth in client assets, as assets under custody/administration and assets under management ended the quarter up 15% and 14%, respectively, compared to a year ago. We remain committed to driving efficiencies in our cost base for the long term, while continuing to invest in people, technology, and regulatory initiatives to support our growing businesses,” said Frederick H. Waddell, Chairman and Chief Executive Officer.

The current quarter included expense charges of $22.8 million ($14.9 million after tax, or $0.06 per diluted common share) associated with severance and related activities. The prior-year quarter included a net pre-tax gain in revenue of $96.6 million ($59.7 million after tax, or $0.25 per diluted common share) from the sale of Visa Inc. Class B common shares, net of the valuation adjustment to existing swap agreements, partially offset by impairment charges associated with our leasing portfolio, and expense charges of $82.6 million ($51.7 million after tax, or $0.22 per diluted common share) relating to certain securities lending litigation, contractual modifications associated with certain existing asset servicing clients, and severance and other personnel related charges. Excluding these items, current quarter and prior-year quarter net income per diluted common share, net income and return on average common equity were $1.18, $282.8 million, and 12.2% compared to $1.07, $255.0 million, and 11.9%, respectively.

SECOND QUARTER 2017 RESULTS

SUMMARY RESULTS & KEY METRICS

% Change vs.

($ In Millions except per share data)

Q2 2017 Q1 2017 Q2 2016 Q1 2017 Q2 2016
Total Revenue (FTE*) $ 1,330.1 $ 1,293.3 $ 1,323.6 3 % %
Noninterest Expense 937.4 894.5 925.0 5 1
Provision for Credit Losses (7.0 ) (1.0 ) (3.0 ) N/M 133
Provision for Income Taxes 122.9 114.8 131.7 7 (7 )
Net Income 267.9 276.1 263.0 (3 ) 2
Earnings Allocated to Common and

Potential Common Shares

257.6 250.9 252.4 3 2
Diluted Earnings per Common Share $ 1.12 $ 1.09 $ 1.10 3 % 2 %
Return on Average Common Equity 11.6 % 11.6 % 12.3 %
Return on Average Assets 0.91 % 0.96 % 0.92 %
Average Assets $ 118,400.7 $ 116,476.4 $ 114,913.8 2 % 3 %
(*) Total revenue presented on a fully taxable equivalent (FTE) basis is a non-generally accepted accounting principle financial measure that facilitates the analysis of asset yields. Please refer to the Reconciliation to Fully Taxable Equivalent section for further detail.

CLIENT ASSETS

Assets under custody/administration (AUC/A) and assets under management are the primary drivers of the Corporation’s trust, investment and other servicing fees, the largest component of noninterest income. The following table presents the Corporation’s AUC/A, assets under custody, a component of AUC/A, and assets under management by reporting segment.

As of % Change vs.

($ In Billions)

June 30,
2017
March 31,
2017
June 30,
2016
March 31,
2017
June 30,
2016
Assets Under Custody/Administration
Corporate & Institutional Services (C&IS) $ 8,690.8 $ 8,338.2 $ 7,590.8 4 % 14 %
Wealth Management 603.4 586.5 525.1 3 15
Total Assets Under Custody/Administration $ 9,294.2 $ 8,924.7 $ 8,115.9 4 % 15 %
Assets Under Custody
Corporate & Institutional Services $ 6,786.3 $ 6,533.3 $ 5,838.6 4 % 16 %
Wealth Management 593.3 574.4 514.2 3 15
Total Assets Under Custody $ 7,379.6 $ 7,107.7 $ 6,352.8 4 % 16 %
Assets Under Management
Corporate & Institutional Services $ 762.7 $ 741.1 $ 672.3 3 % 13 %
Wealth Management 266.1 260.2 233.9 2 14
Total Assets Under Management $ 1,028.8 $ 1,001.3 $ 906.2 3 % 14 %

TOTAL REVENUE (FTE)

% Change vs.

($ In Millions except per share data)

Q2 2017 Q1 2017 Q2 2016 Q1 2017 Q2 2016
Noninterest Income $ 979.7 $ 930.9 $ 1,017.0 5 % (4 )%
Net Interest Income (FTE*) 350.4 362.4 306.6 (3 ) 14
Total Revenue (FTE*) $ 1,330.1 $ 1,293.3 $ 1,323.6 3 % %
(*) Total revenue and net interest income presented on an FTE basis are non-generally accepted accounting principle financial measures that facilitate the analysis of asset yields. Please refer to the Reconciliation to Fully Taxable Equivalent section for further detail.

Noninterest Income

% Change vs.

($ In Millions)

Q2 2017 Q1 2017 Q2 2016 Q1 2017 Q2 2016
Noninterest Income
Trust, Investment and Other Servicing Fees $ 848.2 $ 808.2 $ 777.2 5 % 9 %
Foreign Exchange Trading Income 49.9 48.1 64.4 4 (22 )
Treasury Management Fees 14.9 14.7 16.0 2 (7 )
Security Commissions and Trading Income 24.1 20.5 20.6 17 17
Other Operating Income 43.0 39.7 141.2 8 (70 )
Investment Security Gains (Losses), net (0.4 ) (0.3 ) (2.4 ) 82 (81 )
Total Noninterest Income $ 979.7 $ 930.9 $ 1,017.0 5 % (4 )%

Q2 2017 vs. Q1 2017

  • Trust, investment and other servicing fees increased primarily due to favorable equity markets, new business, and the favorable impact of movements in foreign exchange rates.
  • Security commissions and trading income increased primarily driven by higher referral, core brokerage, and transition management revenues.
  • Other operating income increased primarily due to net gains on hedging activity.

Q2 2017 vs. Q2 2016

  • Trust, investment and other servicing fees increased primarily due to favorable equity markets and new business, partially offset by the unfavorable impact of movements in foreign exchange rates.
  • Foreign exchange trading income decreased primarily due to lower currency volatility.
  • Security commissions and trading income increased primarily driven by growth from the acquisition of Aviate Global LLP, which closed during Q2 2016, and interest rate swaps.
  • Other operating income in the prior-year quarter included the pre-tax gain on the sale of 1.1 million Visa Inc. Class B common shares, net of the valuation adjustment to existing swap agreements, totaling $118.2 million, partially offset by impairment charges and the loss on sale related to the decision to exit a portion of a non-strategic loan and lease portfolio as well as impairment charges related to the residual value of certain aircraft and rail cars of $18.9 million. Excluding these items, other operating income increased slightly compared to the prior-year quarter primarily due to net gains on hedging activity.

Trust, Investment and Other Servicing Fees by Reporting Segment

% Change vs.

($ In Millions)

Q2 2017 Q1 2017 Q2 2016 Q1 2017 Q2 2016
C&IS Trust, Investment and Other Servicing Fees
Custody and Fund Administration $ 327.5 $ 307.5 $ 293.3 7 % 12 %
Investment Management 99.3 93.5 94.2 6 5
Securities Lending 24.6 23.8 26.8 3 (8 )
Other 35.7 38.1 32.6 (6 ) 10
Total $ 487.1 $ 462.9 $ 446.9 5 % 9 %

Q2 2017 vs. Q1 2017

  • C&IS custody and fund administration fees increased primarily due to new business, the favorable impact of movements in foreign exchange rates, favorable equity markets, and higher transaction volumes.
  • C&IS investment management fees increased primarily due to the favorable impact of equity markets.
  • C&IS other fees decreased primarily due...

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