Costs from a lawsuit settlement, the modification of some customers' contracts and employee severance costs combined to push down second-quarter profit at Northern Trust in Chicago.
The $122 billion-asset company's net income fell 3% to $255 million from a year earlier, it said Wednesday. Earnings per share fell 1% to $1.09. Revenue rose 5% to $1.32 billion.
Noninterest income rose 1% to $1.02 billion on higher trust, investment and other servicing fees. The results included a $118 million gain related to the sale of 1.1 million class B shares of Visa. The results also included $18.9 million of impairment charges and losses on the exit of a loan and lease portfolio, and impairment charges on the residual value of aircraft and railcar leases.
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The three custody banks had been projected to post weak second-quarter results because of a lull in foreign exchange trading. Then Brexit happened, and everything changed.
July 19 -
U.S. Bancorp could see a slight uptick in revenue in its payments business after the U.K.'s decision to leave the European Union, Chief Executive Richard Davis said on a conference call Friday.
July 15 -
For the first time, the Fed this year is requiring banks subject to stress tests to show how they would cope with the possibility of rates dipping into negative territory. Analysts say they will be keeping close watch on custody banks, asset-sensitive regionals and banks with little overseas exposure.
June 20
Foreign exchange trading income fell 14% to $64.4 million. Trading volatility increased late in the second quarter, however, after the United Kingdom voted to leave the European Union. That contributed to a 6% increase in FX trading income on a quarterly basis.
Noninterest expense rose 8% to $925 million as Northern Trust added 800 new full-time employees. Compensation rose 8% to $72.2 million.
Expenses also rose because of several one-time items. Northern Trust recorded a $46.5 million charge to settle securities litigation; an $18.6 million charge related to contractual modifications associated with customers in its corporate and institutional services division; and $17.5 million in total charges related to severance costs.
Money market fee waivers, which have eaten into the profits of all custody banks amid near-zero interest rates, improved considerably. The level of fee waivers fell 28% to about $200,000, Biff Bowman, Northern Trust's chief financial officer, said during a conference call.
Net interest income rose 19% to $300 million. The credit-loss provision fell 70% to $3 million. The net interest margin improved 16 basis points to 1.13%.
Assets under custody rose 3% to $6.4 trillion and assets under management fell 4% to $906 billion.
