01—Abstract
Summary
Summary of the 10-K filed February 28, 2023. Cited figures are marked; the original filing is the authoritative source.
Northern Trust Corporation reported 2022 net income of $1.34 billiona, or $6.14 per diluted common share, down from $1.55 billion, or $7.14 per diluted share, in 2021.
Return on average common equity fell to 12.7% from 13.9%. Total revenue rose to $6.76 billionb from $6.46 billion, driven by Net Interest Income of $1.89 billion (up from $1.38 billion), while Noninterest Income declined to $4.87 billion from $5.08 billion. Management attributes the decline in fee income to market volatility and client outflows, and notes that Noninterest Expense rose 10% to $4.98 billion.
The filing also discloses a $213.0 millionc pre-tax loss on available-for-sale debt securities that the company intended to sell; those securities were sold in January 2023. Assets under custody/administration fell 16% to $13.60 trillion at December 31, 2022, and assets under management decreased 22% to $1.25 trillion, reflecting net outflows, unfavorable markets and currency translation. Total assets were $155.0 billion, down from $183.9 billion, largely because client deposits and Federal Reserve deposits declined.
The Bank's capital ratios, including a Common Equity Tier 1 ratio of 10.8% on a standardized basis for the Corporation, remained above well-capitalized thresholds. The company returned $648.4 milliond to common stockholders through dividends and repurchases in 2022, and raised its quarterly common dividend to $0.75 per share. Management highlights the financing of the balance sheet with $1.0 billion of 4.00% senior notes and $1.0 billion of 6.125% subordinated notes issued in 2022, and notes exposure to Russian-related restrictions on certain client cash held with subcustodians.
02—Key points
Key Highlights
- Net income declined 14% to $1.34 billion ($6.14 diluted EPS) from $1.55 billion ($7.14) in 2021.
- Net interest income rose 36% to $1.89 billion, with net interest margin on an FTE basis rising to 1.39% from 0.99%.
- Noninterest income fell 4% to $4.87 billion, driven by a $214.0 million investment security loss, while Trust, Investment and Other Servicing Fees rose 2% to $4.43 billion.
- Assets under custody/administration decreased 16% to $13.60 trillion and assets under management decreased 22% to $1.25 trillion, reflecting unfavorable markets and net outflows.
- Noninterest expense increased 10% to $4.98 billion, reflecting higher compensation, equipment and software, and other operating costs.
- Total stockholders' equity declined to $11.3 billion from $12.0 billion, largely due to a $1.53 billion increase in accumulated other comprehensive loss.
- All capital ratios exceeded well-capitalized requirements; the Corporation's standardized Common Equity Tier 1 ratio was 10.8%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 28, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $6.76B$6.46B | +4.6% |
| Interest Expense | $990.50M$23.80M | +4061.8% |
| Net Income | $1.34B$1.55B | −13.5% |
| EPS (Basic) | $6.16$7.16 | −14.0% |
| EPS (Diluted) | $6.14$7.14 | −14.0% |
| Shares Outstanding (Basic) | 208.31M208.08M | +0.1% |
| Shares Outstanding (Diluted) | 208.87M208.90M | 0.0% |
05—Questions
Frequently Asked Questions
Why did Northern Trust's net income decline in 2022 despite higher net interest income?
Net interest income rose to $1.89 billion from $1.38 billion, but noninterest income fell to $4.87 billion from $5.08 billion, largely due to a $214.0 million investment security loss, including a $213.0 million loss tied to an intent to sell available-for-sale debt securities. Noninterest expense also increased 10% to $4.98 billion, and the provision for credit losses was $12.0 million compared with a $81.5 million release in 2021.
How did client assets change during 2022?
Assets under custody/administration decreased 16% to $13.60 trillion at December 31, 2022, from $16.25 trillion, primarily reflecting unfavorable markets and currency translation. Assets under management decreased 22% to $1.25 trillion, reflecting net outflows of $198.3 billion, unfavorable markets and currency translation.
What did Northern Trust do with its capital and dividends in 2022?
The company returned $648.4 million to common stockholders through dividends and share repurchases, and increased its quarterly common stock dividend to $0.75 per share. It repurchased 311,536 shares, all withheld for tax obligations on share-based compensation, for $35.4 million. It issued $1.0 billion of 4.00% senior notes due 2027 and $1.0 billion of 6.125% subordinated notes due 2032 during 2022.
What was the $213 million loss on securities, and was it resolved?
The company recognized a $213.0 million pre-tax loss in the fourth quarter of 2022 from its intent to sell $2.1 billion of available-for-sale debt securities, written down to fair value. The securities were sold in January 2023, resulting in an incremental $6.9 million gain compared with the December 31, 2022 fair value.
06—Continue