Northern Trust adds to assets under management and custody, raising 1Q profit

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Investors and money managers poured billions of dollars into accounts at Northern Trust over the winter, boosting the Chicago company’s first-quarter earnings.

The $130 billion-asset custody bank’s net income rose 43% from a year earlier to $359 million. Earnings per share of $1.58 were 17 cents better than the mean estimate of analysts compiled by FactSet Research Systems.

The results included a charge of $15.8 million to cover the decreased value of tax assets due to the new federal tax law, and a gain of $22.6 million for a software-related accounting item. Northern Trust also recorded $8.6 million in charges to cover the cost of job cuts.

Noninterest income increased 17% to $1.1 billion, primarily due to higher trust, investment and servicing fees. Northern Trust also recorded higher income from foreign exchange trading and securities commissions.

Assets under administration and custody climbed 21% to $10.8 trillion. Assets under management rose 16% to $1.2 trillion. The two categories are the largest contributors to trust, investment and servicing fees, which make up a big chunk of noninterest income.

The two asset categories also grew as a result of Northern Trust’s acquisition of UBS Asset Management’s fund administration business in Luxembourg and Switzerland.

“This quarter’s performance reflected organic growth in our businesses, as well as the impact of favorable macroeconomic conditions,” CEO Michael O’Grady said in a news release Tuesday.

Noninterest expense increased 11% to $995 million due to higher salaries and employee benefits, and fees for outside services and software. Northern Trust’s income tax rate fell to 21.1% from 29.4% as a result of the new tax law.

Net interest income rose 8% to $393 million from higher short-term interest rates and an increase in interest-earning assets.

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