01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. 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, 2016, it reported consolidated total assets of $123.9 billiona and stockholders' equity of $9.8 billion, with assets under custody/administration of $8.54 trillion and assets under management of $942.4 billion. Its two client-focused segments are Corporate & Institutional Services (C&IS) and Wealth Management. Net income for 2016 was $1.03 billion, up 6% from $973.8 million in 2015, and diluted EPS was $4.32 versus $3.99.
Results included a $118.2 millionb gain on the sale of Visa Class B shares (net of swap valuation adjustment) and several charges, including $46.5 million for securities lending litigation settlement and $18.6 million for contractual modifications with asset servicing clients. Total revenue rose 6% to $4.96 billion, driven by a 15% increase in net interest income, while trust, investment and other servicing fees grew 4% to $3.11 billion. Noninterest expense rose 6% to $3.47 billion.
Capital and credit metrics were stable. The Corporation's Common Equity Tier 1 ratio under the advanced approach was 12.4%c, and all capital ratios exceeded well-capitalized thresholds.
Nonperforming assets fell 12% to $165.4 milliond, and the provision for credit losses was a $26.0 million credit. The company repurchased 6.1 million shares and returned $754.7 million to common stockholders, and it issued $493.5 million of Series D preferred stock in August 2016.
02—Key points
Key Highlights
- Net income of $1.03 billion in 2016, up 6% from $973.8 million; diluted EPS of $4.32 versus $3.99 in 2015.
- Revenue increased 6% to $4.96 billion, with net interest income up 15% and trust, investment and other servicing fees up 4% to $3.11 billion.
- Assets under custody/administration reached $8.54 trillion (up 10%) and assets under management reached $942.4 billion (up 8%) at year-end 2016.
- Noninterest expense rose 6% to $3.47 billion, including $46.5 million of securities lending litigation charges and $18.6 million of client contract modification charges.
- Nonperforming assets declined 12% to $165.4 million; the 2016 provision for credit losses was a $26.0 million credit.
- Common Equity Tier 1 ratio (advanced approach) of 12.4% at December 31, 2016; the Corporation returned $754.7 million to common stockholders through dividends and repurchases.
- Filing notes an executive order from February 2017 and possible changes to the Dodd-Frank Act, along with Brexit uncertainty affecting EU operations.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 28, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $4.96B$4.70B | +5.5% |
| Interest Expense | $182.00M$153.90M | +18.3% |
| Net Income | $1.03B$973.80M | +6.0% |
| EPS (Basic) | $4.35$4.03 | +7.9% |
| EPS (Diluted) | $4.32$3.99 | +8.3% |
| Shares Outstanding (Basic) | 227.58M232.28M | −2.0% |
| Shares Outstanding (Diluted) | 229.15M234.22M | −2.2% |
05—Questions
Frequently Asked Questions
What drove the increase in net income in 2016?
Net income rose $58.7 million, or 6%, to $1.03 billion. Higher net interest income (up $164.8 million, or 15%) and higher trust, investment and other servicing fees (up 4%) were the main drivers, partially offset by higher noninterest expense and lower foreign exchange trading income. The results also included a $118.2 million gain on the sale of Visa Class B shares, partly offset by several charges.
How did the company's client asset base change?
Assets under custody/administration increased to $8.54 trillion from $7.80 trillion, and assets under management increased to $942.4 billion from $875.3 billion. The increases primarily reflected net inflows and favorable equity markets, partially offset by unfavorable foreign currency translation.
Is the company adequately capitalized, and how much capital did it return?
All of the Corporation's capital ratios exceeded the well-capitalized requirements at year-end 2016. The Common Equity Tier 1 ratio was 12.4% under the advanced approach and 11.8% under the standardized approach. During 2016 the company repurchased 6.1 million shares and returned $754.7 million to common stockholders, and it issued $493.5 million of Series D preferred stock in August 2016.
What regulatory matters could affect the company going forward?
The filing describes the new administration's February 2017 executive order on financial regulation, which may lead to changes in the Dodd-Frank Act, and a Department of Labor fiduciary rule that is scheduled to phase in beginning April 10, 2017 but may be delayed. The Corporation states it cannot predict the ultimate effects. The Corporation must submit a 2017 capital plan to the Federal Reserve by April 5, 2017, and the Federal Reserve expects to publish its response by June 30, 2017.
06—Continue