Fee-income gains from new business fueled a big improvement in third-quarter profit at Northern Trust in Chicago, offsetting an increase in personnel-related expenses. Still, it said further cost-cutting is on the horizon.

The $131 billion-asset company’s net income climbed 16% to $298 million compared with a year earlier. Earnings per share of $1.20 was 8 cents better than the average estimate of analysts compiled by FactSet Research Systems.

Total revenue on a fully tax equivalent basis rose 11% to $1.36 billion.

“Our third-quarter results continued to demonstrate our ability to drive top-line growth,” Chairman and CEO Frederick Waddell said in a news release Wednesday.

Frederick Waddell, chairman and chief executive officer of Northern Trust.
Exiting on a positive note
“Our third-quarter results continued to demonstrate our ability to drive top-line growth,” Chairman and CEO Frederick Waddell said in a news release Wednesday. Waddell will step down as CEO at yearend, the company said this week. Bloomberg News

Northern Trust on Tuesday announced that Waddell will retire as CEO on Jan. 1 and will remain chairman. President Michael O’Grady will succeed Waddell as CEO.

Noninterest income increased 9% to $991 million. Trust, investment and other servicing fees, the biggest component of noninterest income at Northern Trust, rose 10% to $868 million as a result of favorable equity markets and new business.

Noninterest expense climbed 11% to $936 million due to an additional $6 million of severance charges, and higher payroll taxes and retirement plan expenses.

Northern Trust announced on Wednesday a new cost-cutting program that will target organizational alignment, process optimization and strategic sourcing. Northern Trust projected that the changes will generate yearly savings of $250 million by 2020.

Net interest income rose 17% to $354 million as higher short-term interest rates improved Northern Trust’s profit margin.

Assets under custody and administration rose 14% to $9.7 trillion. Assets under management increased 19% to $1.1 trillion.

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Andy Peters

Andy Peters

Andy Peters writes about regional banks, consumer finance and debt collections for American Banker.