01—Abstract
Summary
Summary of the 10-K filed February 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Northern Trust Corporation reported net income of $687.3 milliona, or $2.81 per diluted common share, for 2012, compared with $603.6 million, or $2.47 per share, in 2011.
Revenue reached $3.90 billionb, up 3% from 2011, driven mainly by trust, investment and other servicing fees of $2.41 billion, which rose 11% on new business, revised fee structures and the full-year effect of 2011 acquisitions. Foreign exchange trading income fell 36% to $206.1 million on lower currency volatility and client volumes, and net interest income declined 2% to $990.3 million as the net interest margin fell to 1.22% from 1.27%. Assets under custody reached $4.8 trillion and assets under management reached $758.9 billion at year-end 2012.
Noninterest expense rose 2% to $2.88 billionc, and the provision for credit losses fell to $25.0 million from $55.0 million as credit quality improved in commercial and institutional loans, though residential and commercial real estate weakness persisted. The company reported total assets of $97.5 billion and stockholders' equity of $7.5 billion, with a Tier 1 capital ratio of 12.8% and a Tier 1 leverage ratio of 8.2%, both above the well-capitalized thresholds. Dividends declared totaled $286.9 million, and share repurchases were $162.9 million.
The filing also details the regulatory environment under the Dodd-Frank Act, including SIFI heightened prudential standards, resolution planning, and the Volcker Rule, along with Basel III phase-in changes; U.S. regulators delayed initial Basel III requirements on November 9, 2012. The Corporation is not designated a global systemically important bank.
02—Key points
Key Highlights
- Net income rose to $687.3 million ($2.81 diluted EPS) in 2012 from $603.6 million ($2.47) in 2011.
- Revenue totaled $3.90 billion, up 3%, with trust, investment and other servicing fees up 11% to $2.41 billion.
- Foreign exchange trading income declined 36% to $206.1 million on reduced currency volatility and client volumes.
- Net interest margin fell to 1.22% from 1.27%, and net interest income decreased 2% to $990.3 million.
- Assets under custody reached $4.8 trillion and assets under management reached $758.9 billion at December 31, 2012.
- Provision for credit losses dropped to $25.0 million from $55.0 million, while residential and commercial real estate loan weakness persisted.
- Tier 1 capital ratio of 12.8% and total capital ratio of 14.3% remained well above well-capitalized minimums; stockholders' equity was $7.5 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 26, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $3.90B$3.77B | +3.3% |
| Interest Expense | $297.40M$399.50M | −25.6% |
| Net Income | $687.30M$603.60M | +13.9% |
| EPS (Basic) | $2.82$2.47 | +14.2% |
| EPS (Diluted) | $2.81$2.47 | +13.8% |
| Shares Outstanding (Basic) | 240.42M241.40M | −0.4% |
| Shares Outstanding (Diluted) | 240.88M241.81M | −0.4% |
05—Questions
Frequently Asked Questions
What drove the increase in Northern Trust's 2012 earnings?
Net income rose to $687.3 million from $603.6 million, primarily reflecting higher trust, investment and other servicing fees from new business, revised fee structures, the full-year benefit of 2011 acquisitions and lower waived money market fund fees, partially offset by lower foreign exchange trading income and higher noninterest expense.
Why did foreign exchange trading income decline?
Foreign exchange trading income fell $118.4 million, or 36%, to $206.1 million, reflecting reduced currency market volatility and lower client volumes compared with 2011.
How strong is Northern Trust's capital position?
At December 31, 2012, the Corporation reported a Tier 1 capital ratio of 12.8%, a total capital ratio of 14.3% and a leverage ratio of 8.2%, all above the well-capitalized minimums of 6.0%, 10.0% and 5.0%, respectively. The Bank also exceeded these levels.
What is the outlook for regulatory requirements such as Basel III and Dodd-Frank?
The filing says the full impact of Dodd-Frank and Basel III is still being assessed. U.S. regulators delayed the first Basel III requirements on November 9, 2012, to an undetermined future date. The Corporation believes its capital strength, balance sheet and business model leave it well positioned for Basel III, and it has not been designated a global systemically important bank.
How did credit quality change in 2012?
The provision for credit losses fell to $25.0 million from $55.0 million, and net charge-offs decreased to $26.3 million from $83.4 million. Nonperforming loans and leases declined to $254.8 million, reflecting improvement in commercial and institutional loans, while residential and commercial real estate loans remained weak.
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