Northern Trust said third-quarter profit rose 15 percent as cost cuts combined with rising stock markets pushed revenue higher.

Net income increased to $203 million, or 84 cents a share, from $176 million, or 73 cents, a year earlier, the Chicago- based company said today in a statement. Results matched the 84- cent average estimate of seven analysts surveyed by Bloomberg.

"For Northern Trust, the equity markets are the major component" in the increase in profits, Sonia Parechanian, an analyst in New York with S&P Capital IQ, said in an interview before results were announced. About half the money Northern invests or oversees for clients is in stocks, she said.

Northern Trust, under pressure to improve profitability amid record-low interest rates, is benefiting as global equity markets climb for the second straight year. Chairman and Chief Executive Officer Frederick H. Waddell followed larger rivals Bank of New York Mellon Corp. and State Street Corp. with job cuts in 2012 that, combined with technology initiatives, are designed to lift annual pretax income by $250 million by the end of this year.

The cuts helped Northern Trust increase revenue faster than the growth in expenses. Non-interest revenue rose 11 percent to $810 million, including a 12 percent increase in custody and fund-administration fees and a 43 percent jump in foreign- exchange trading income.

Non-interest expenses climbed 6 percent to $741 million. Compensation and benefits, the largest component of expenses, rose 2.9 percent.

Northern Trust's assets under custody rose 10 percent to $5.24 trillion. The amount of money the company invests for clients increased 13 percent to $846 billion.

The Standard & Poor's 500 Index of U.S. stocks rose 5.2 percent, including reinvested dividends, in the third quarter, and the MSCI ACWI Index of global stocks surged 8.1 percent. The S&P 500 and the MSCI index both rose 19 percent in the 12 months ended Sept. 30.

Low interest rates hurt custody banks by reducing the returns they make on lending and on their own investments. The U.S. Federal Reserve has held its benchmark interest rate at zero to 0.25 percent since December 2008 in an attempt to stimulate borrowing and economic growth.

To prevent money market mutual funds from yielding negative returns, Northern Trust waived $32.4 million in fund fees in the third quarter, compared with $16.8 billion in the same period a year earlier.

Custody banks keep records, track performance and lend securities for institutional investors, including mutual funds, pension funds and hedge funds. Northern Trust also manages investments for individuals and institutions.

Results were announced before the start of regular U.S. trading. Northern Trust gained 8.6 percent this year through yesterday, compared with a 29 percent advance by the Standard & Poor's 20-company index of asset managers and custody banks.

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