01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Northern Trust Corporation is a financial holding company and a leading provider of asset servicing, fund administration, asset management, fiduciary and banking solutions.
At December 31, 2011, the Corporation had consolidated total assets of $100.2 billiona and stockholders' equity of $7.1 billion. Its two principal business units are Corporate and Institutional Services (C&IS) and Personal Financial Services (PFS). During 2011 the company completed two acquisitions: the fund administration and custody business of the Bank of Ireland Securities Services (now Northern Trust Securities Services (Ireland) Limited) and Omnium LLC (now Northern Trust Hedge Fund Services LLC), together with a merger of its bank subsidiaries on October 1, 2011.
For 2011, net income was $603.6 millionb, or $2.47 per diluted share, compared with $669.5 million, or $2.74, in 2010. Results include $91.6 million of restructuring, acquisition and integration charges ($59.8 million after tax, or $.25 per common share). Revenue was $3.77 billion, and total noninterest income was $2.76 billion.
Trust, investment and other servicing fees rose to $2.17 billionc from $2.08 billion, while foreign exchange trading income fell 15% to $324.5 million. Net interest margin declined to 1.27% from 1.41%. Noninterest expense rose 13% to $2.83 billion.
The provision for credit losses fell to $55.0 milliond from $160.0 million, and nonperforming assets decreased $63.6 million. Assets under custody reached $4.3 trillion and assets under management reached $662.9 billion at year-end.
The Corporation reported a tier 1 capital ratio of 12.5% and a total capital ratio of 14.2%, both above the well-capitalized minimums, and declared common dividends of $273.4 million in 2011. The filing also discusses Dodd-Frank Act and Basel III implications, which the company says it believes leave it well positioned.
02—Key points
Key Highlights
- Net income of $603.6 million ($2.47 per diluted share) in 2011, down from $669.5 million ($2.74) in 2010.
- Assets under custody of $4.3 trillion and assets under management of $662.9 billion at December 31, 2011, both up from 2010.
- Two 2011 acquisitions: Bank of Ireland Securities Services (about $80 billion added to Irish assets under custody and administration) and Omnium LLC (about $73 billion in assets under administration).
- Restructuring, acquisition and integration charges of $91.6 million pre-tax, reducing 2011 earnings by $.25 per common share.
- Net interest margin fell to 1.27% from 1.41% amid the persistent low interest rate environment; foreign exchange trading income declined 15%.
- Credit quality improved: provision for credit losses fell to $55.0 million from $160.0 million, and net charge-offs decreased to $83.4 million from $143.2 million.
- Capital remained strong, with a tier 1 capital ratio of 12.5% and total capital ratio of 14.2% at year-end 2011.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $3.77B$3.65B | +3.4% |
| Interest Expense | $399.50M$378.00M | +5.7% |
| Net Income | $603.60M$669.50M | −9.8% |
| EPS (Basic) | $2.47$2.74 | −9.9% |
| EPS (Diluted) | $2.47$2.74 | −9.9% |
| Shares Outstanding (Basic) | 241.40M242.03M | −0.3% |
| Shares Outstanding (Diluted) | 241.81M242.50M | −0.3% |
05—Questions
Frequently Asked Questions
How did Northern Trust's profitability change in 2011?
Net income fell to $603.6 million, or $2.47 per diluted share, from $669.5 million, or $2.74, in 2010. The decline reflects $91.6 million of restructuring, acquisition and integration charges, a lower net interest margin, reduced foreign exchange trading income and higher noninterest expense, partly offset by growth in trust, investment and other servicing fees.
What were the main acquisitions in 2011?
In June 2011 Northern Trust acquired the fund administration, investment operations outsourcing and custody business of the Bank of Ireland Securities Services, now Northern Trust Securities Services (Ireland) Limited. In July 2011 it acquired Omnium LLC, a hedge fund administrator with about $73 billion in assets under administration, now Northern Trust Hedge Fund Services LLC. The purchase prices were $84.4 million and $145.1 million, respectively.
How is the company's capital position?
At December 31, 2011, the Corporation's tier 1 capital ratio was 12.5%, its total capital ratio was 14.2%, and its leverage ratio was 7.3%, all above the well-capitalized minimums. Stockholders' equity was $7.1 billion, and the company declared common dividends of $273.4 million in 2011 and repurchased shares at a cost of $79.4 million.
What are the key risks to the business highlighted in the filing?
The filing cites economic and market conditions, including the European sovereign debt crisis; low interest rates, which reduce net interest margin and money market fund fees; declines in securities values, including asset-backed and auction rate securities; operational and cyber security risks; and an evolving regulatory environment under the Dodd-Frank Act and Basel III. It also notes ongoing litigation tied to its securities lending program and a securities class action.
How did the credit portfolio perform?
Nonperforming loans and leases were $293.7 million at year-end 2011, down from $333.0 million. The provision for credit losses decreased to $55.0 million from $160.0 million in 2010, and the allowance assigned to loans and leases was $294.8 million, or 1.01% of total loans and leases, compared with 1.14% in 2010. Residential real estate loans remained a source of weakness.
06—Continue