Higher deposit costs hold profits in check at Northern Trust
Profit at Northern Trust in Chicago was little changed in the second quarter as rising deposit costs ate into the benefits of higher yields and fee income was flat.
The $126.6 billion-asset custody bank reported net income of $379.7 million, compared with $379.5 million a year earlier. Its earnings per share of $1.75 were 8 cents higher than the mean estimate of analysts compiled by FactSet Research Systems.
Interest income rose 12% to $647.9 million as the bank shifted more of its holdings from lower-yielding investment securities to loans and other earning assets with higher short-term interest rates.
However, net interest income rose just 1% to $417.4 million as deposits costs soared. Interest expense increased 44% to $222.8 million. One reason was that cheaper non-interest-bearing deposits fell 17% to $22.1 billion, far outpacing a 2% decline in interest-bearing deposits to $78.1 billion.
Noninterest income was also little changed at $1.1 billion as growth in trust, investment and servicing fees was offset by lower foreign trading exchange income stemming from the strength of the U.S. dollar. The British pound fell 4% against the dollar year over years, and the euro dropped 3%.
Total assets under custody and administration rose 6% to $11.3 trillion. Total assets under management climbed 3% to $1.2 trillion.
Noninterest expense increased 1% to $1 billion on higher salaries and employee benefits.