Northern Trust earnings rise 46% after year-ago costs

Northern Trust Corp.'s second- quarter earnings rose 46 percent a year after costs related to lease transactions reduced earnings.

Net income increased to $314.2 million from $215.6 million, or 96 cents a share, a year earlier, the Chicago-based custody bank said in a statement today. Earnings per share were 95 cents after preferred dividends were paid to the U.S. government's bank-rescue fund. Fifteen analysts surveyed by Bloomberg expected earnings of 79 cents, excluding certain items.

The value of assets Northern Trust administers and invests for clients shrank during the worst stock-market drop since the Great Depression. The average value for the Standard & Poor's 500 Index in the second quarter declined 34 percent from a year earlier.

"A year ago there was a much more favorable environment for all the trust banks, but the improvement from last quarter is notable," Andrew Marquardt, an analyst at Fox-Pitt Kelton Cochran Caronia Waller LLC in New York, said in an interview before the results were released.

Northern Trust's assets under custody fell 19 percent to $3.21 trillion, while the amount of money it invests for clients decreased 26 percent to $558.9 billion.

Net income was reduced by $68.6 million last month when Northern Trust bought back $1.58 billion in preferred shares sold to the government in 2008 through the Troubled Asset Relief Program. TARP was an effort by the Treasury to inject cash into the banking system during the worst months of the credit crunch.

Northern Trust sold $750 million in common shares and $500 million in senior notes in April to help finance the repurchase.

Rival custody bank State Street Corp. in Boston yesterday reported a loss of $3.3 billion in the second quarter after writing down the value of investments by $3.7 billion.

Northern Trust announced results before the start of regular U.S. trading. It fell 37 cents to $57.54 yesterday in Nasdaq Stock Market composite trading. The company has declined 25 percent in the past year, compared with a 26 percent drop by the 15-member Standard & Poor's index of asset managers and custody banks.

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.