01—Abstract
Summary
Summary of the 8-K filed April 16, 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, compared with $113.1 million ($0.52 per share) in the fourth quarter of 2023 and $334.6 million ($1.51 per share) in the first quarter of 2023.
The results were weighed down by a $189.4 millionb pre-tax loss on available-for-sale debt securities sold in a portfolio repositioning and a $12.5 million pre-tax increase to the FDIC special assessment. Total revenue (FTE) was $1,654.1 million, up 6% sequentially but down 6% from the prior-year quarter. Trust, investment and other servicing fees rose 5% sequentially and 7% year over year to $1,142.9 million, supported by favorable markets, and total assets under custody/administration reached $16.47 trillion.
Net interest income (FTE) increased 7% sequentially to $535.4 millionc on higher deposit levels and interest rates, though it declined 2% from the prior-year quarter on higher funding costs. Noninterest expense fell 2% sequentially to $1,364.7 million, while the effective tax rate rose to 26.1%. The company declared $153.4 million in common dividends and repurchased $132.0 million of common stock.
Capital ratios remained above well-capitalized thresholds, with a standardized Common Equity Tier 1 ratio of 11.4%d at March 31, 2024. The filing furnishes three exhibits: the earnings press release, presentation materials for the quarterly earnings review, and a Financial Trends report with historical quarterly data. The information is furnished rather than filed under Section 18 of the Exchange Act.
02—Key points
Key Highlights
- Net income of $214.7 million, or $0.96 per diluted share, versus $113.1 million ($0.52) in Q4 2023 and $334.6 million ($1.51) in Q1 2023.
- Pre-tax loss of $189.4 million on available-for-sale debt securities sold in a portfolio repositioning, recognized in investment security gains (losses), net; after-tax impact of $141.5 million.
- Trust, investment and other servicing fees of $1,142.9 million, up 5% sequentially and 7% from the prior-year quarter, driven primarily by favorable markets.
- Total assets under custody/administration of $16,472.5 billion (reported in millions in the filing as $16,472.5 billion), up 7% sequentially and 16% year over year; assets under management of $1,500.7 billion.
- Net interest income (FTE) of $535.4 million, up 7% sequentially on higher deposit levels and interest rates, but down 2% from the prior-year quarter due to higher funding costs.
- Noninterest expense of $1,364.7 million, down 2% sequentially, with other operating expense reduced by lower FDIC special assessment ($12.5 million versus $84.6 million in Q4 2023).
- Capital return of approximately $285.4 million in Q1 2024 through $153.4 million of common dividends and $132.0 million of share repurchases; capital ratios remained above well-capitalized levels.
03—Questions
Frequently Asked Questions
What drove the decline in earnings compared with the prior-year quarter?
Net income fell to $214.7 million from $334.6 million in Q1 2023. The filing attributes the change to the $189.4 million pre-tax securities loss from the portfolio repositioning, compared with a $6.9 million gain in the prior-year quarter, along with higher funding costs that reduced net interest income and a higher effective tax rate of 26.1% versus 24.6%.
How did trust fee revenue perform?
Trust, investment and other servicing fees totaled $1,142.9 million, up 5% from Q4 2023 and 7% from Q1 2023. The filing states the increases were primarily due to favorable markets, new business in custody and fund administration, and asset inflows in the Global Family Office business.
What did management say about the quarter's outlook?
Chairman and CEO Michael O'Grady said the company delivered solid results, with trust fees and net interest income both growing sequentially. He said that as the second quarter starts, Northern Trust remains focused on optimizing growth, strengthening resiliency and driving greater productivity.
Were there any one-time items affecting the quarter?
Yes. Results included a $189.4 million pre-tax loss on securities sold in a portfolio repositioning (after-tax $141.5 million) and a $12.5 million pre-tax increase to the FDIC special assessment (after-tax $9.3 million). The filing notes that a $9.8 million occupancy charge in Q1 2023 also affected the prior-year comparison.
How strong are the company's capital ratios?
The filing states that capital ratios for Northern Trust Corporation and The Northern Trust Company remained strong at March 31, 2024 and exceeded the requirements to be classified as well-capitalized. The Corporation's standardized Common Equity Tier 1 ratio was 11.4%, and the advanced approach ratio was 13.5%. The current-quarter ratios are preliminary until the Form 10-Q is filed.
04—Continue