Northern Trust 3Q profits fall short of expectations

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Northern Trust’s third-quarter profit surged year over year but sagged a bit when compared with the prior quarter.

The Chicago custody bank said Wednesday that net income climbed 26% from the same period last year to $375 million as strong gains in fee and interest income offset higher expenses. Revenue climbed 9% year over year to nearly $1.5 billion, thanks to an 8% increase in trust, investment and other servicing fees and a 14% jump in interest income.

The $122 billion-asset company attributed the year-over-year growth in fee income in large part to its acquisition of UBS Asset Management’s funds services business in Switzerland and Luxembourg. That deal closed in October 2017.

It attributed the growth in interest income primarily to higher interest rates and a widening net interest margin.

Those gains more than made up for a 7% increase in noninterest expenses, which topped $1 billion for the quarter. The company said that higher compensation costs resulting from the UBS acquisition accounted for much of increase.

When compared with the second quarter, the results fell a bit short of expectations. Net income fell 4%, due primarily to an 8% decline in custody and service fees and a one-time impairment related to a community development investment.

The company said that fees declined from the prior quarter due to lower transaction volume and “unfavorable” movements in the foreign-exchange markets. Interest income fell as well due to a slight decline in earning assets.

Earnings per share came in at $1.58 or 3 cents below the mean estimate of analysts surveyed by FactSet Research Systems.

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