Northern Trust (NTRS) is well positioned, analysts say, to benefit from a rebound in trading and the fees it collects from money management. However, increasing regulation is an unknown factor, one which gives investors in the sector pause.
Northern Trust is a financial holding company that provides asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals worldwide.
The corporation conducts business through various U.S. and non-U.S. subsidiaries, including The Northern Trust Company bank, via a network of offices in 18 U.S. states, Washington, D.C., and 16 international locations in North America, Europe, the Middle East, and the Asia Pacific region. At Dec. 31, 2011, the corporation had consolidated total assets of $100.2 billion and stockholders’ equity of $7.1 billion.
The bank is an Illinois banking corporation headquartered in the Chicago financial district and the corporation’s principal subsidiary. Founded in 1889, the bank conducts its business through its U.S. operations and its various U.S. and non-U.S. branches and subsidiaries. At Dec. 31, 2011, the bank had consolidated assets of $99.8 billion and common equity capital of $6.9 billion.
On June 1, 2011, Northern Trust acquired the fund administration, investment operations outsourcing and custody business of the Bank of Ireland Securities Services (BoISS) from the Bank of Ireland Group.
On July 29, 2011, Northern Trust acquired Omnium, a hedge fund administrator with approximately $73 billion in assets under administration as of the closing. On Oct. 1, 2011, Northern Trust merged two of its bank subsidiaries, Northern Trust and Northern Trust Bank into The Northern Trust Company.
Northern Trust organizes its services globally around its two client-focused principal business units: corporate and institutional services (C&IS) and personal financial services (PFS). Two other business units provide services to the two principal business units: Northern Trust global investments (NTGI), which provides investment management, and operations and technology (O&T), which provides operating and systems support.
“The U.S. economy's slow recovery continues, which can be seen in the improving credit quality of our loan portfolio,” Northern Trust CFO Mike O’Grady said in a recent call with analysts.
“With nonperforming assets declining for the third quarter in a row, our loan loss provision decreased to $5 million. Execution on our driving performance initiative is off to a strong start for the year on both the revenue and expense fronts.”
Northern Trust has a market cap of $10.38 billion in a sector, capital markets, where the average company size is $7.32 billion. Its trailing 12-month P/E ratio is 17.14 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.22, compared to 1.25 for the sector.
Its projected earnings per share growth for the coming year is 14.77 percent, compared to a sector average of 22.41 percent.
Wall Street is divided on Northern Trust, with an outperform rating from Raymond James but an underperform from Morgan Stanley.
“The completion of strategic acquisitions in 2011 depicts the company’s strong financial position. Further, we expect increased asset management and servicing fees based on significant improvement in equity markets and higher volumes,” wrote the analysts at Zacks Investment Research, rating the stock a hold.
“However, the Dodd-Frank Act will bring in numerous regulatory changes over the next several years, which might act as deterrents to the company’s fundamentals.”
Northern Trust next reports on July 17.
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