01—Abstract
Summary
Summary of the 10-K filed February 28, 2022. Cited figures are marked; the original filing is the authoritative source.
Northern Trust Corporation reported 2021 net income of $1.55 billiona, or $7.14 per diluted common share, up from $1.21 billion and $5.46 in 2020.
Net income increased $336.0 millionb, or 28%. Total revenue rose to $6.46 billion from $6.10 billion, driven by Trust, Investment and Other Servicing Fees of $4.36 billion (up 9%) and Other Operating Income of $243.9 million (up 26%), partially offset by Net Interest Income of $1.38 billion (down from $1.44 billion). Noninterest expense rose 4% to $4.54 billion, and the provision for credit losses was a release of $81.5 million versus a $125.0 million provision in 2020.
Assets under custody/administration grew 12% to $16.25 trillionc at December 31, 2021, and assets under management grew 14% to $1.61 trillion, reflecting favorable markets and net inflows. Total assets were $183.9 billion and stockholders' equity was $12.0 billion. The net interest margin on an FTE basis fell to 0.99% from 1.19%, primarily due to lower average interest rates.
Money market mutual fund fee waivers totaled $287.8 milliond in 2021, versus $29.3 million in 2020. Capital remained strong, with the Corporation's Common Equity Tier 1 ratio at 11.9% (standardized) and 13.2% (advanced), and all capital ratios above well-capitalized thresholds. The Corporation returned $861.5 million to common stockholders through dividends and repurchases of 2,527,544 shares, and maintained its quarterly common dividend at $0.70 per share.
02—Key points
Key Highlights
- Net income rose 28% to $1.55 billion, and diluted EPS increased to $7.14 from $5.46 in 2020.
- Total revenue increased to $6.46 billion, with Noninterest Income at 79% of total revenue in 2021 versus 76% in 2020.
- Assets under custody/administration reached $16.25 trillion (up 12%) and assets under management reached $1.61 trillion (up 14%).
- Net interest margin on an FTE basis declined to 0.99% from 1.19%, reflecting lower average interest rates.
- Provision for credit losses was a release of $81.5 million in 2021 compared with a $125.0 million provision in 2020.
- Return on average common equity improved to 13.9% from 11.2%.
- Common Equity Tier 1 capital ratio was 11.9% (standardized) at year-end 2021, with all capital ratios above well-capitalized requirements.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 28, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $6.46B$6.10B | +6.0% |
| Interest Expense | $23.80M$200.30M | −88.1% |
| Net Income | $1.55B$1.21B | +27.8% |
| EPS (Basic) | $7.16$5.48 | +30.7% |
| EPS (Diluted) | $7.14$5.46 | +30.8% |
| Shares Outstanding (Basic) | 208.08M208.32M | −0.1% |
| Shares Outstanding (Diluted) | 208.90M209.01M | −0.1% |
05—Questions
Frequently Asked Questions
What drove the increase in Northern Trust's 2021 earnings?
Trust, Investment and Other Servicing Fees rose $366.1 million, or 9%, to $4.36 billion, primarily due to favorable markets and new business, partially offset by higher money market mutual fund fee waivers. Other Operating Income rose $49.9 million, or 26%, and the provision for credit losses swung to a release of $81.5 million from a $125.0 million provision in 2020.
How did the net interest income and margin perform in 2021?
Net Interest Income on an FTE basis decreased $59.3 million, or 4%, to $1.42 billion, due to a decreased net interest margin, which fell to 0.99% from 1.19%. This was partially offset by average earning assets increasing $19.7 billion, or 16%, to $143.9 billion.
How much did the company return to shareholders in 2021?
During 2021, Northern Trust declared common dividends totaling $593.9 million and repurchased 2,527,544 shares at a total cost of $267.6 million. The quarterly common dividend was maintained at $0.70 per share, and the repurchase program authorized in October 2021 allows up to 25.0 million shares with no expiration date.
What is the outlook for fee waivers and interest rates affecting the business?
The filing states that Northern Trust voluntarily waived $287.8 million of money market mutual fund fees in 2021, compared with $29.3 million in 2020. It also states that if short-term interest rates increase as currently expected, fee waivers would likely decline, and that the company expects to continue waiving fees until interest rates rise sufficiently.
How strong is the company's capital position?
At December 31, 2021, the Corporation's Tier 1 Leverage ratio was 6.9% and its Total Capital ratio was 14.1% under the standardized approach. The Bank's capital ratios also exceeded well-capitalized levels, and the stress capital buffer requirement for the 2021 capital plan cycle was set at 2.5%, resulting in an effective Common Equity Tier 1 minimum of 7.0%.
06—Continue