Northern Trust earnings fall 58 percent as fee income drops
Northern Trust Corp.'s first- quarter earnings dropped 58 percent as fee income declined a year after proceeds from the initial public offering of Visa Inc. added to its profit. Shares fell as much as 17 percent in electronic trading.
Net income fell to $161.8 million from $385 million, or $1.71 a share, a year earlier, the Chicago-based custody bank said in a statement today. Earnings per share equaled 61 cents in the three months ended March 31 after preferred dividends that were paid to the U.S. government's bank rescue fund, missing the 97-cent-a-share estimate of 16 analysts surveyed by Bloomberg.
The value of assets Northern Trust administers and invests for clients shrank during the worst market drop since the Great Depression. The average value for the Standard & Poor's 500 Index in the first quarter declined 40 percent compared with the first quarter of 2008.
"Asset-management fees are expected to continue to contract with recent declines in the market value of assets under management," Marty Mosby, an analyst for FTN Equity Capital Markets Corp. in Memphis, Tennessee, said in an April 15 research report.
Stock Drops
Northern Trust announced results before the start of regular U.S. trading. It fell 14 percent to $50.30 at 8:39 a.m. in electronic trading after dropping 7.8 percent to $58.15 yesterday in Nasdaq Stock Market composite trading.
The company has declined 20 percent in the past year, compared with a 45 percent drop by the 15-member Standard & Poor's index of asset managers and custody banks.
Assets under custody fell 29 percent to $2.84 trillion, while the amount of money the company invests for clients fell 33 percent to $522.3 billion. Revenue dropped 21 percent to $904.2 million.
Northern Trust received $1.6 billion from the U.S. Treasury last year in exchange for preferred shares and warrants under the Troubled Asset Relief Program. Each quarter, the company pays a portion of a 5 percent annual dividend on the preferred shares. The company paid $23 million under the program in the first quarter.
Northern Trust company said in February it would return its TARP money "as soon as prudently possible" after being criticized by U.S. lawmakers for spending money entertaining clients and employees at a professional golf tournament it sponsored near Los Angeles.
Northern Trust, as a Visa member bank, received $244 million before taxes of the IPO proceeds from the largest electronic-payments network in the first quarter of 2008.
Northern Trust, like other custody banks, keeps records, tracks performance and lends securities to institutional investors including mutual funds, pensions and hedge funds. It also operates mutual funds and investment accounts for institutions and wealthy individuals.