01—Abstract
Summary
Summary of the 10-K filed February 26, 2015. Cited figures are marked; the original filing is the authoritative source.
Northern Trust Corporation, a financial holding company, reports that 2014 net income rose to $811.8 milliona, up 11% from $731.3 million in 2013, with diluted earnings per share of $3.32 versus $2.99.
Revenue increased 6% to $4.33 billionb, driven by a 9% increase in trust, investment and other servicing fees to $2.83 billion and an 8% rise in net interest income, partly offset by a 14% decline in foreign exchange trading income to $210.1 million. Noninterest expense rose 5% to $3.14 billion, reflecting business growth, technology investment and organizational realignment costs. Client assets grew, with assets under custody at $5.97 trillion (up from $5.58 trillion) and assets under management at $934.1 billion (up from $884.5 billion).
Total assets reached $109.9 billionc and stockholders' equity was $8.4 billion at year-end. The company issued $388.5 million of Series C preferred stock in August 2014, repurchased 7.5 million common shares for $480.7 million, and raised the quarterly common dividend to $0.33. Net interest margin declined to 1.08% from 1.13%, reflecting persistently low interest rates, and money market fund fee waivers rose to $129.8 million.
The filing also details an extensive regulatory framework under Dodd-Frank and Basel III. Capital ratios exceeded well-capitalized thresholds, with the Corporation's advanced-approach common equity Tier 1 ratio at 12.4%. The company disclosed pending securities lending litigation, an SEC subpoena regarding securities lending, and a French prosecutor's recommendation to charge a subsidiary related to trust administration, with reasonably possible losses estimated at up to approximately $130 milliond in aggregate.
02—Key points
Key Highlights
- Net income of $811.8 million in 2014, up 11% from $731.3 million; diluted EPS of $3.32 versus $2.99 in 2013.
- Revenue rose 6% to $4.33 billion, led by a 9% increase in trust, investment and other servicing fees to $2.83 billion.
- Foreign exchange trading income fell 14% to $210.1 million on lower currency volatility and client volumes.
- Net interest margin narrowed to 1.08% from 1.13%, while net interest income rose 8% to $1.01 billion on higher earning assets.
- Assets under custody reached $5.97 trillion and assets under management reached $934.1 billion at year-end 2014.
- Returned $792.4 million to common stockholders through dividends and buybacks; issued $388.5 million of Series C preferred stock.
- Pending securities lending litigation, an SEC subpoena, and a French criminal recommendation involving a subsidiary; reasonably possible losses estimated up to about $130 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 26, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $4.33B$4.09B | +5.9% |
| Interest Expense | $181.40M$222.40M | −18.4% |
| Net Income | $811.80M$731.30M | +11.0% |
| EPS (Basic) | $3.34$3.01 | +11.0% |
| EPS (Diluted) | $3.32$2.99 | +11.0% |
| Shares Outstanding (Basic) | 235.83M239.27M | −1.4% |
| Shares Outstanding (Diluted) | 237.72M240.55M | −1.2% |
05—Questions
Frequently Asked Questions
How did Northern Trust's profitability change in 2014?
Net income rose 11% to $811.8 million, and diluted earnings per share increased to $3.32 from $2.99. Return on average common equity improved to 10.0% from 9.5%. Results included $47.5 million of pre-tax charges and write-offs in 2014.
What drove revenue growth and what held it back?
Revenue grew 6% to $4.33 billion. Trust, investment and other servicing fees rose 9% on new business and higher equity markets, and net interest income rose 8%. Foreign exchange trading income fell 14%, and money market fund fee waivers increased to $129.8 million.
How much capital did the company return to shareholders?
The company returned $792.4 million to common stockholders, including $311.7 million in declared dividends and $480.7 million in share repurchases. It repurchased 7.5 million shares at an average price of $64.20 and raised the quarterly dividend to $0.33.
What legal and regulatory risks does the filing disclose?
The filing discloses securities lending lawsuits from program participants, an SEC subpoena from April 2014 related to securities lending, and a January 2015 recommendation by French prosecutors to charge a subsidiary in connection with trust administration. The company estimates the upper end of reasonably possible losses on certain matters at about $130 million in aggregate.
06—Continue