Northern Trust recorded fourth-quarter 2014 earnings per share of
$0.94, beating the Zacks Consensus Estimate of $0.81 and were above
the year-ago quarter figure of $0.75. Quarterly results benefited
from top-line growth and reduced expenses. Further, strong capital
ratios and augmented assets under management and assets under
custody were the positives for the quarter. However, reduced net
interest margin was a concern. After reviewing the results, we are
maintaining our Neutral recommendation on the shares.
Northern Trust Corporation is the holding company for its main
subsidiary, Northern Trust Company, as well as a number of other
banking and non-banking financial service subsidiaries. The company
derives majority of its revenue and earnings from the trust
business and provides a number of related banking and financial
The company's main sources of revenue include two of its primary
business units: Corporate and Institutional Services (C&IS) and
Wealth Management (WM). Asset management and related services to WM
and C&IS clients are provided primarily by a third business
unit, Asset Management. Northern Trust emphasizes on quality
through a high level of service with effective use of technology,
delivered by a fourth business unit, Operations & Technology
The Corporate and Institutional Services unit (accounted for
55.0% of 2013 total fees) provides asset servicing, asset
management and related services to corporate and public retirement
funds, foundations, endowments, fund managers, insurance companies
and government funds a full range of commercial banking services to
large and mid-sized corporations and financial institutions and
foreign exchange services. As of Sep 30, 2014, total C&IS
assets under custody (AUC) was $5.4 trillion and assets under
management (AUM) was $702.9 billion.
The Wealth Management division (45.0%) delivers customized
investment management and trust services to high net worth
individuals and families through a network of 81 offices across 18
states of North America and Washington, D.C., as well as offices in
London and Guernsey. As of Sep 30, 2014, total AUC was $507.2
billion and total AUM was $220.4 billion.
Asset Management, through the company's various subsidiaries,
provides a broad range of asset management and related services and
other products to clients around the world, including clients of
C&IS and WM. The segment's activities also include overlay
services and other risk management services.
Operations & Technology (O&T) supports all of Northern
Trust's business activities, including the processing and product
management activities of C&IS, WM, and Asset Management. These
activities are conducted principally in the operations and
technology centers in Chicago, London, and Bangalore.
As of Sep 30, 2014, the company had total assets of $111.2
billion, AUM of $923.3 billion and AUC of $5.9 trillion.
In Jul 2011, Northern Trust completed the acquisition of Omnium
LLC, a leading hedge fund administrator, from Citadel. The
acquisition of Omnium, which had around $70 billion in assets under
administration, enhanced Northern Trust's capabilities and created
an industry-leading hedge fund administration platform for
In Jun 2011, Northern Trust completed the acquisition of Bank of
Ireland Securities Services (BoISS) from Bank of Ireland Group for
60 million ($82 million) as announced in Feb 2011. Through this
acquisition, Northern Trust is combining the fund administration
business with the existing activities in Ireland and providing
outstanding consumer service and solutions to clients. The
acquisition has improved and expanded Northern Trust's Global Fund
Service capabilities, particularly in fund administration and
Moreover, Northern Trust announced the expansion of its services
in Australia. The company incorporated Unit Registry solutions to
improve its fund administration capabilities in Australia. Northern
Trust has signed an agreement with Computershare to provide such
services, combining local expertise with a wide range of worldwide
Northern Trust Corporation (NTRS): Read the Full
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