Northern Trust Profit Falls on Hit From Debt Investment Sale

(Reuters) – Asset and wealth manager Northern Trust posted a 38% fall in first-quarter profit on Tuesday as a loss on the sale of some debt investments offset gains from higher fee income for servicing and managing client assets.

The company incurred a $189.4 million loss on the sale of certain debt securities, as it repositioned its portfolio.

It also booked a $12.5 million expense tied to the replenishment of a government deposit insurance fund, which was drained after Silicon Valley Bank and Signature Bank failed last year.

Shares of Northern Trust fell 1.2% in premarket trading. They have dipped 0.8% so far this year, compared to a 3.3% fall and 5.8% rise for peers State Street and Bank of New York Mellon, respectively.

Northern Trust said the 135-year old company’s net interest income (NII) – the difference between what it earns on assets and pays on liabilities – fell 0.6% to $528.1 million due to higher deposits costs.

Equity markets have rallied in recent months amid hopes of a soft landing for the economy, resulting in assets under custody or administration jumping 16% to $16.47 trillion in the quarter.

Rivals State Street and Bank of New York Mellon also saw client assets drive up their fee-based income higher.

The company’s trust, investment, and other servicing fees rose 7% to $1.14 billion. Such fees, primarily determined by the market value of client assets managed and serviced, make up more than two-thirds of its total revenue.

Foreign exchange trading income rose 8% to $57 million, driven by higher client volumes.

Chicago, Illinois-based Northern’s total revenue fell 5.6% to $1.65 billion.

The company’s earnings allocated to common and potential common shares fell to $196.1 million, or 96 cents per share, in the three months ended March 31, from $315.2 million, or $1.51 per share, a year earlier.

(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Maju Samuel)

Copyright 2024 Thomson Reuters.

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