Private banking and corporate asset management company Northern Trust (NTRS) is actively making acquisitions to bolster its opportunities for new assets and fees. However, several economic factors appear to be holding back the company's prospects for earnings growth. Patient investors, however, currently earn an attractive dividend yield while waiting for the opposing forces to sort themselves out.
Northern Trust is a combination banking company and asset and investment management firm. The two main lines of business are money management for high net worth customers, known in the industry as private banking, and asset management for corporate and institutional customers. Of the assets under management, three-quarters is for institutional customers and the remaining quarter is for individual clients.
Net income for 2011 is forecast to be $2.69 per share, almost the same level as the $2.65 earned in 2010. Comments from Northern Trust press releases attribute the lack of earnings growth to the low interest rate environment and corporate expenses, which are growing faster than revenue.
The 28 cents per share quarterly dividend gives Northern Trust a 3 percent-plus yield at recent share prices. Although the company did not reduce the dividend through the financial crisis, the payout has not been increased since the first quarter of 2008.
In the first half of 2011, Northern Trust made a pair or acquisitions to boost both its international exposure and range of services offered. In June, the purchase of the Bank of Ireland Security Services was completed, picking up the Bank of Ireland's asset management business. In August, the deal closed for the acquisition of hedge fund administrator Omnium LLC. The purchase comes with $70 billion of hedge fund assets under management, giving Northern Trust expanded hedge fund exposure.
The prevalent Wall Street analyst rating on NTRS is hold or neutral. Guggenheim Securities analyst Marty Mosby recently noted that Northern Trust, with its emphasis on money management, has been more affected by the low interest rate environment than have been banking companies with larger lending portfolios.
The company next reports on Oct. 20.
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