Neutral on Northern Trust - Analyst Blog
March 14 2013 - 6:50AM
Zacks
On Mar 11, 2013, we reiterated our long-term recommendation on
Northern Trust Corporation (NTRS) at Neutral based
on its well-managed global franchise, strong capital base and
expense reduction initiatives. However, regulatory issues coupled
with fundamental pressures on the banking sector might act as
deterrents to the company’s fundamentals.
Why Neutral?
Northern Trust reported its fourth-quarter 2012 earnings of 71
cents per share, lagging the Zacks Consensus Estimate by 4 cents.
However, this was favorable compared with the prior-year quarter
earnings of 67 cents per share.
Quarterly results on a year-over-year basis benefited from top-line
growth and decline in operating expenses. Further, improving credit
quality and strong capital ratios were the tailwinds for Northern
Trust.
Northern Trust successfully executed the Driving Performance
initiatives announced at the beginning of 2012, which contributed
about $160 million in pre-tax profit improvements in 2012, split
approximately 40–60 between revenue and expense items and boosted
pre-tax margin by about 375 basis points. Moreover, the company
remains on track to deliver $250 million of pre-tax benefits by the
end of 2013.
However, low short-term interest rates along with persistent narrow
spreads at the short end of the yield curve continue to negatively
impact net interest income and money market mutual fund fees.
Though the U.S. economy posted stable to improving economic data
during 2012, including favorable developments in unemployment and
housing, concerns about the outlook for the global economy and
continued political uncertainty persist.
For Northern Trust, the Zacks Consensus Estimate for 2013 increased
0.3% to $3.21 per share as 3 out of 16 estimates were revised
higher over the last 30 days. For 2014, 4 of the 13 estimates moved
north over the same time frame, lifting the Zacks Consensus
Estimate by 0.3% to $3.59 per share. With the upswing in the Zacks
Consensus Estimates, Northern Trust retains a Zacks Rank #3
(Hold).
Other Major Banks to Consider
Besides Northern Trust, other banks that are worth considering
include BankUnited Inc. (BKU), Fifth Third
Bancorp (FITB) and State Street
Corporation (STT). All the 3 banks retain a Zacks Rank #2
(Buy).
BANKUNITED INC (BKU): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis Report
NORTHERN TRUST (NTRS): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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