01—Abstract
Summary
Summary of the 10-Q filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Northern Trust Corporation reported first-quarter 2024 net income of $214.7 milliona, or $0.96 per diluted common share, down from $334.6 million, or $1.51 per diluted share, in the first quarter of 2023.
Total revenue was $1,646.8 millionb, down from $1,744.6 million, driven by a $189.4 million loss on the sale of available-for-sale debt securities recorded in Investment Security Gains (Losses), net. Trust, Investment and Other Servicing Fees rose 7% to $1,142.9 million on favorable markets and new business, while Noninterest Expense increased 6% to $1,364.7 million, including a $12.5 million FDIC special assessment. Return on average common equity was 7.3%, compared with 12.4% a year earlier.
Client assets were a key growth driver. Assets under custody/administration rose 7% from December 31, 2023 to $16,472.5 billionc, and assets under management rose 5% to $1,500.7 billion, reflecting favorable markets and client inflows. Total deposits increased 7% to $123.9 billion, and total assets grew 4% to $156.1 billion.
Net interest income was $528.1 milliond, down 1%, primarily due to higher funding costs, and net interest margin on an FTE basis declined to 1.61% from 1.62%. Credit quality remained sound, with a negative provision for credit losses of $8.5 million, net charge-offs of $10.4 million, and nonaccrual loans falling 43% to $37.0 million.
Capital ratios remained above well-capitalized thresholds, with a Common Equity Tier 1 ratio of 11.4% on the standardized approach at both March 31, 2024 and December 31, 2023. The dividend payout ratio rose to 78.1% from 49.7%, and the company repurchased 1,647,526 common shares for $132.0 million.
02—Key points
Key Highlights
- Net income fell 36% to $214.7 million, and diluted EPS fell to $0.96 from $1.51, largely due to a $189.4 million loss on sale of available-for-sale debt securities made as part of a portfolio repositioning.
- Trust, Investment and Other Servicing Fees increased 7% to $1,142.9 million, driven by favorable markets and new business; Asset Servicing and Wealth Management fees rose 6% and 9%, respectively.
- Noninterest Expense rose 6% to $1,364.7 million, including a $12.5 million FDIC special assessment, with Compensation up to $627.1 million.
- Assets under custody/administration grew 7% to $16,472.5 billion and assets under management grew 5% to $1,500.7 billion from December 31, 2023.
- Net interest income declined 1% to $528.1 million due to higher funding costs; net interest margin (FTE) was 1.61% versus 1.62% a year earlier.
- Nonaccrual loans decreased 43% to $37.0 million, and the provision for credit losses was a negative $8.5 million, reflecting reserve decreases.
- Common Equity Tier 1 capital ratio (standardized approach) was 11.4% at March 31, 2024, and the company repurchased 1,647,526 common shares for $132.0 million during the quarter.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 23, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.14B$1.06B | +7.5% |
| Interest Expense | $1.92B$924.20M | +107.5% |
| Net Income | $214.70M$334.60M | −35.8% |
| EPS (Basic) | $0.96$1.51 | −36.4% |
| EPS (Diluted) | $0.96$1.51 | −36.4% |
| Shares Outstanding (Basic) | 204.63M208.19M | −1.7% |
| Shares Outstanding (Diluted) | 205.13M208.73M | −1.7% |
05—Questions
Frequently Asked Questions
Why did Northern Trust's net income decline so sharply in the first quarter of 2024?
Net income fell 36% to $214.7 million, primarily because of a $189.4 million loss on the sale of available-for-sale debt securities recorded in Investment Security Gains (Losses), net. The filing states this loss arose from a repositioning of the portfolio. Noninterest Expense growth of 6% and lower net interest income also contributed.
How did client asset levels change?
Assets under custody/administration increased 7% to $16,472.5 billion and assets under management increased 5% to $1,500.7 billion from December 31, 2023. The filing attributes the increases mainly to favorable markets and client asset inflows.
Is the company's capital position sound?
Yes. The filing states that the capital ratios of Northern Trust Corporation and The Northern Trust Company exceeded the requirements for well-capitalized classification at March 31, 2024. The Corporation's Common Equity Tier 1 ratio on the standardized approach was 11.4%, and its Tier 1 leverage ratio was 7.8%.
How is credit quality trending?
Credit quality improved. The company recorded a negative provision for credit losses of $8.5 million, net charge-offs were $10.4 million, and nonaccrual loans fell 43% to $37.0 million from December 31, 2023. Nonaccrual loans to total loans were 0.08%, compared with 0.13% at year-end 2023.
What is the impact of the FDIC special assessment?
The company recognized an additional cost of $12.5 million in the first quarter of 2024 related to the FDIC special assessment, recorded in Other Operating Expense. This followed the $84.6 million accrued in the fourth quarter of 2023.
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