Northern Trust Corp. second-quarter earnings fell 36% as the investment bank and asset manager saw service-fee revenues weaken and its portion on nonperforming loans continued to grow.
However, the results beat analysts' expectations and shares were up 1.4% at $50 in premarket trading.
The custodial bank reported sharply higher troubled loans for a second straight quarter, in contrast to many major banks whose bottom lines have been lifted as credit quality improved. However, fees from trust and investment services - its core business - which had remained strong in the prior quarter - fell 10%.
Northern Trust, which serves affluent people and institutions, reported a profit of $199.6 million, or 82 cents a share, down from $226.1 million, or 95 cents a share, a year earlier. The latest period included a 4 cent tax benefit while the prior year had a 37-cent impact from repaying the $1.58 billion it received from the Treasury's Troubled Asset Relief Program.
Revenue decreased 7% to $973.8 million as servicing fees fell 10% on reduced lending revenue due to lower asset-valuation loss recoveries and an increased level of fee waivers for money-market mutual funds.
Analysts polled by Thomson Reuters most recently forecast earnings of 74 cents on revenue of $924 million.
Provision for credit losses fell to $50 million from $60 million a year earlier but rose from $40 million in the first quarter. Net charge-offs, or loans that lenders don't expect to collect, fell to $38.3 million on year from $44.7 million but were up sequentially from $30.6 million. Nonperforming loans, or those expected to turn bad, rose to $389.8 million from $233.8 million and $365.2 million, respectively.